BUSSINESS LAW
Agreement
An agreement is when two or more parties come to a mutual understanding about their rights and
obligations regarding something.
It is basically a “promise or set of promises” made between people.
Example: If A promises to sell his bike to B for ₹50,000, and B accepts, that is an agreement.
👉 Agreement = Offer + Acceptance.
Contract
A contract is an agreement that is legally enforceable by law.
Not all agreements are contracts — only those that meet certain conditions under the Indian
Contract Act, 1872 (like free consent, lawful object, consideration, competence of parties, etc.).
Example: If A sells his bike to B for ₹50,000 and both agree, this is a contract because it can be
enforced in court.
👉 Contract = Agreement + Legal enforceability
Essential Elements of a Valid Contract (as per the Indian Contract Act, 1872)
1. Offer and Acceptance
One party must make a lawful offer, and the other must lawfully accept it.
The acceptance must be absolute and unconditional.
2. Intention to Create Legal Relationship
Both parties must intend that their agreement should be enforceable by law.
Example: Social or domestic promises (like going for dinner) are not contracts.
3. Lawful Consideration
Something of value must be exchanged between the parties (money, goods, services, etc.).
Consideration must be real and lawful.
,4. Capacity of Parties
The parties must be competent to contract, i.e.:
Must be of sound mind
Must have attained majority (18 years in India)
Must not be disqualified by law
5. Free Consent
Consent of parties must be given freely.
It should not be obtained by coercion, undue influence, fraud, misrepresentation, or mistake.
6. Lawful Object
The purpose of the contract must be legal.
Contracts for illegal purposes (like gambling, smuggling, etc.) are void.
7. Certainty and Possibility of Performance
The terms of the contract must be clear and certain.
It must be possible to perform (not impossible by nature or law).
8. Not Declared Void
The agreement should not be one that has been expressly declared void under the Act (e.g.,
agreements in restraint of marriage, trade, or legal proceedings).
Offer & Acceptance
Intention to create legal relationship
Lawful Consideration
Capacity of parties
Free Consent
Lawful Object
Certainty & Possibility of performance
Not declared void
, Types of Contracts
1. On the basis of Validity
Valid Contract → Satisfies all legal requirements. (e.g., Sale of goods with lawful consideration)
Void Contract → Not enforceable by law (e.g., contract with minor).
Voidable Contract → Enforceable at the option of one party (e.g., consent obtained by fraud).
Illegal Contract → Forbidden by law (e.g., drug smuggling deal).
Unenforceable Contract → Cannot be enforced due to technical reasons (e.g., missing stamp,
limitation period expired).
2. On the basis of Formation
Express Contract → Terms are expressed in words (spoken or written)
Implied Contract → Formed by conduct/behavior of parties (e.g., boarding a bus).
Quasi Contract → Not a real contract but imposed by law to prevent unjust enrichment (e.g., person
getting benefit by mistake).
3. On the basis of Performance
Executed Contract → Both parties have performed their obligations (e.g., A sells and delivers goods,
B pays).
Executory Contract → Yet to be performed in future.
Partly Executed → One party has performed, other yet to perform.
4. On the basis of Obligation
Unilateral Contract → Only one party has to perform (e.g., reward for finding lost dog).
Bilateral Contract → Both parties have reciprocal obligations (e.g., A agrees to sell goods, B agrees to
pay).
Validity → Valid, Void, Voidable, Illegal, Unenforceable
Formation → Express, Implied, Quasi
Performance → Executed, Executory, Partly Executed
Obligation → Unilateral, Bilateral
Agreement
An agreement is when two or more parties come to a mutual understanding about their rights and
obligations regarding something.
It is basically a “promise or set of promises” made between people.
Example: If A promises to sell his bike to B for ₹50,000, and B accepts, that is an agreement.
👉 Agreement = Offer + Acceptance.
Contract
A contract is an agreement that is legally enforceable by law.
Not all agreements are contracts — only those that meet certain conditions under the Indian
Contract Act, 1872 (like free consent, lawful object, consideration, competence of parties, etc.).
Example: If A sells his bike to B for ₹50,000 and both agree, this is a contract because it can be
enforced in court.
👉 Contract = Agreement + Legal enforceability
Essential Elements of a Valid Contract (as per the Indian Contract Act, 1872)
1. Offer and Acceptance
One party must make a lawful offer, and the other must lawfully accept it.
The acceptance must be absolute and unconditional.
2. Intention to Create Legal Relationship
Both parties must intend that their agreement should be enforceable by law.
Example: Social or domestic promises (like going for dinner) are not contracts.
3. Lawful Consideration
Something of value must be exchanged between the parties (money, goods, services, etc.).
Consideration must be real and lawful.
,4. Capacity of Parties
The parties must be competent to contract, i.e.:
Must be of sound mind
Must have attained majority (18 years in India)
Must not be disqualified by law
5. Free Consent
Consent of parties must be given freely.
It should not be obtained by coercion, undue influence, fraud, misrepresentation, or mistake.
6. Lawful Object
The purpose of the contract must be legal.
Contracts for illegal purposes (like gambling, smuggling, etc.) are void.
7. Certainty and Possibility of Performance
The terms of the contract must be clear and certain.
It must be possible to perform (not impossible by nature or law).
8. Not Declared Void
The agreement should not be one that has been expressly declared void under the Act (e.g.,
agreements in restraint of marriage, trade, or legal proceedings).
Offer & Acceptance
Intention to create legal relationship
Lawful Consideration
Capacity of parties
Free Consent
Lawful Object
Certainty & Possibility of performance
Not declared void
, Types of Contracts
1. On the basis of Validity
Valid Contract → Satisfies all legal requirements. (e.g., Sale of goods with lawful consideration)
Void Contract → Not enforceable by law (e.g., contract with minor).
Voidable Contract → Enforceable at the option of one party (e.g., consent obtained by fraud).
Illegal Contract → Forbidden by law (e.g., drug smuggling deal).
Unenforceable Contract → Cannot be enforced due to technical reasons (e.g., missing stamp,
limitation period expired).
2. On the basis of Formation
Express Contract → Terms are expressed in words (spoken or written)
Implied Contract → Formed by conduct/behavior of parties (e.g., boarding a bus).
Quasi Contract → Not a real contract but imposed by law to prevent unjust enrichment (e.g., person
getting benefit by mistake).
3. On the basis of Performance
Executed Contract → Both parties have performed their obligations (e.g., A sells and delivers goods,
B pays).
Executory Contract → Yet to be performed in future.
Partly Executed → One party has performed, other yet to perform.
4. On the basis of Obligation
Unilateral Contract → Only one party has to perform (e.g., reward for finding lost dog).
Bilateral Contract → Both parties have reciprocal obligations (e.g., A agrees to sell goods, B agrees to
pay).
Validity → Valid, Void, Voidable, Illegal, Unenforceable
Formation → Express, Implied, Quasi
Performance → Executed, Executory, Partly Executed
Obligation → Unilateral, Bilateral
