Wednesday, August 11, 2010

Contract: Defenition and Elements

In recent times, corruption charges against the 2010 commonwealth games committee is a big national issue. It is said that, the commonwealth games committee has not any proper contract with UK based firm AM Films.
A report from NDTV on 3rd August, 2010:
“London: As India's top anti-corruption watchdog, the Central Vigilance Commission (CVC) investigates why Suresh Kalmadi, the Chairman of the Commonwealth Games (CWG) Organising Committee, and his team did not have a written contract with AM Films, the company that they paid huge sums of money to, NDTV now learns that the company is under the scanner of the UK government.NDTV has accessed documents from the UK Registrar of Companies, which clearly show the dubious nature of AM Films and its sister firm, AM Car Hire and Van Company. While AM Films got a liquidation notice in July, which has now been withdrawn, its sister company AM Car Hire is already in liquidation.The CWG's Organising Committee struck an expensive deal with both companies, owned by Ashish Patel, to provide certain services during the Queen's Baton Relay”. link: http://www.ndtv.com/article/sports/cwg-uk-firm-am-films-dubious-ndtv-accesses-documents-41612

What is a contract, in general? What is the definition of contract? What are the elements of a contract?

An agreement enforceable by law is a contract.
The definition of contract has two parts, i.e. “Agreement” and “Enforceable by law.”
When a proposal is offered to a person or party and the same is accepted by the person or party to whom it is offered, and then it becomes agreement.
When an agreement gives rise to legal obligation, then it becomes contract. Agreement of social, moral or religious nature, do not give rise to legal obligation, so they can not be called contract. For example, promise to meet together in a party, is not a contract. A contract must have a legal side, which is liable to suit in case of breach of contract. When a government enterprise or a body which is authorized and regulated by government (in some or other way) and which is appointed by Government and which has a national interest and which is contributed by national fund must enter into an agreement with a proper “contract.” The commonwealth games organizing committee has entered into an agreement with AM firm with out considering all the legal consequences, hence it can not be termed as proper contract.
An improper contract can be “voidable” or “void” or “unenforceable” or “unlawful”, depending upon the nature of agreement.

Essential elements of a valid contract:
1. Offer and acceptance
2. Intention to create a legal relation
3. Lawful object
4. Lawful consideration
5. Capacity of the parties
6. Free consent
7. Writing and registration: As per Indian Contract Act, a contract may be in writing or oral. But in some certain cases, a contract will be valid, only when it is properly written or/ and registered. Similarly some other acts also demand for a written contract, which may required to be registered. For an example, an agreement for a sale of immovable property must be in writing and registered under the Transfer of Property Act, 1882 (The act mentioned is applicable in India).
8. Certainty
9. Possibility of performance

The law of contract is mentioned in the Indian Contract Act, 1872. Definition of contract is mentioned in the Section 2 (h) of the Indian Contract Act. It is applicable to the whole country, except Jammu and Kashmir. A valid contract must have certain elements which are mentioned in Section 10, 20 and 56.

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