A contract creates a relationship between two or more parties to fulfil the conditions of the contract. The basics of contracts are given under the Contract act. Most people enter into the contract on daily basis. When a person or a company takes some action or make the payment in exchange for any goods or services, actually they are forming a valid contract. Even this contract does not look like the contract. For example, the paying of the electricity bill is also an example of contract because electricity department has provided their services to us and in return, we are paying then for service. The following points will help you to understand the basics of contracts in law.
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What is a contract?
What do you mean by contract? A contract is an agreement that is enforceable by law between two or more parties who are competent to contract. The term party can be the person, company or any other legal identity. It does not matter that who is the party in the contract because almost every type of contract under business law have these essential elements of a valid contract:
- Consideration into contract
Consideration in a contract can be the money or any other thing which is paid in exchange for goods or services.
The object of the contract is the purpose of the contract for which the parties of the contract has entered into a legal agreement. It must not be related to some illegal activity like drugs or prostitution.
A person giving money to another person for child labour is a void contract.
- Competency of parties
The capacity to contract of the parties is also the main element of the contract which decides whether the contract is void or voidable.
- Free consent
Free consent in a contract creates the contract acceptable from both sides. If the consent of one party is not free, the contract will become void ab initio.
- Express or implied
The difference Between Express and Implied Contracts is that express contracts are those contracts that are formed with the help of oral and written whereas the implied contract is the contract that comes into existence with the actions of the parties to the contract.
Why do we give preference to written contracts?
Both oral and written contracts are enforceable contracts in the eyes of law. But sometimes, it becomes tough to prove the oral contracts. Written contact can be used as documentary evidence for the suit
Some contracts must be in written form. There are some conditions for the written contracts that should be there which pressurize the contract to be in written form.
- An agreement that cannot be completed in less than one year
- Contract of sale exceeding $500
- Contract of sale for transfer land
- Promise to pay the debt of someone else, etc.
A written contract also help the parties to remember the terms and conditions of the contract. It is important to do the contract as same given under a written contract.
Can a person write the contract while entering into a contract with another party?
Yes, a person can write the terms and conditions for the contract while making a valid contract with another party. But, if you think that the matter in which you are making the contract is complex, you can contact a lawyer to make the contract. It is the best way to make your contract fast, legal and enforceable by law. While making the contract personally, it should be kept in mind that the contract must be fulfilling the essentials of the valid contract.
What is a breach of contract?
While making the contract, we add terms and conditions for the performance of the contract. Sometimes, it happens that one or both parties break these terms which are known as breach of contract.
The terms and conditions of a contract are some kind of obligation toward the party. When a party fails to fulfil the obligations of the contract, it is considered that a breach has been done in a contract.
Breach of the contract makes the contract voidable contract at the option of the aggrieved party. If the party thinks that they can continue with the contract, the contract will be valid and enforceable by law.
The law provides the remedies for the breach of contract. The aggrieved party can use such a remedy to take compensation from the party at the fault.
How is the enforcement of the contract done?
The contract made between two competent parties sometimes comes to a point where the breach is done and the aggrieved party needs to be compensated by the guilty party. Many types of contracts added the terms and conditions in the written contract which included the remedies if such types of breach occur. The party take the help of these remedies to enforce the contract.
The simplest way to resolve the dispute of contract is to file the Plaint under Civil Procedure Code in the court by submitting the evidence of the breach and contract. There are many courts that deal with small and high claims depending upon the basics of contracts.
Arbitration is the fast process to solve the dispute arising between the partners or parties to the contract.
Can I enter into a contract with a person by mistake?
Yes, sometimes, the person mistakenly enters into a contract with another person. These types of contracts are known and quasi-contracts. In quasi-contract, a person in due care delivers something into your account. The law binds the person to repay that person who enjoyed the goods or service or another.
For example, a person mistakenly sent his money to your bank account. You checked the money and spend this money without knowing about this transaction. Now, the court binds you to pay that amount to the person back which you received by mistake.
Can I make a contract which is based on conditions?
Yes, a person can make a contract that is based on the happening or non-happening of an occasion. These types of contracts are known as Contingent contracts. For example, making or a contract with another person that you will pay him $100 dollar if India wins the match.
The basics of contracts make the contract enforceable by law. It is an important part of running any type of company or trade. The best way to make a legal contract is to consult with the lawyer for the formation of the contract.