Nominated contracts and Provisions of commitments
Elements of Contract Formation. To form a legally binding contract, six basic elements of contract formation must be satisfied.
1. The parties to the contract must have capacity to contract;
2. Both parties must state the mutual assent to be bound to the contract terms;
3. Both parties must give consideration;
4. The contract must have a lawful purpose;
5. The terms of the contract must be reasonably certain and clear;
6. The contract must be in a form permitted by law. This paper explores these six elements.
In any event, in order to consider the validity of the contract, three essential points must be certain and clear:
1. Nature of the contract
2. Consideration which includes, for example, price and thing sold in a contract of sale.
At the time of the creation of a valid contract, a civil obligation will be established immediately.
Civil obligation must be distinguished from the natural obligation. Civil obligation has two elements, namely legal relationship created by one of the sources of obligation (i.e. the five sources) and enforceability. The enforceability element may be extinguished for certain legal causes such as prescription. Basically natural obligation was civil but lacks the enforceability element.
There is also another types of obligation such as social and moral obligations. Both types have no elements such as the relationship between the father and his son. Providing an aid for the son’s marriage in not enforceable by law and there is no legal relationship so this is a social obligation.
Types of Contracts
On this base, Contracts are of two types. Namely Bilateral Contracts and Unilateral Contracts.
Bilateral Contracts: If considerations in both directions are to be moved after the contract, it is called Bilateral Contract.
Example: A Contract has got formed between X and Y on 1st Jan, According to which X has to deliver goods to Y on 3rd Jan and Y has to pay amount on 3rd Jan. It is bilateral contract.
Unilateral Contract: If considerations is to be moved in one direction only after the Contract, it is called Unilateral Contract.
Types of Contracts on the basis of Execution
On this base Contracts can be classified into two groups. namely, Executed and Executory Contracts. If performance is completed, it is called executed contract. In case where contractual obligations are to be performed in future, it is called executor contract.
Types of Contracts On the basis of Validity
On this base Contracts can be classified into 5 groups. namely Valid, Void, Voidable, Illegal and Unenforceable Contracts.
Valid: The Contracts which are enforceable in a court of law are called Valid Contracts. To attain Validity the Contract should have certain features like consensus ad idem, Certainty, free consent, two directional consideration, fulfillment of legal formalities, legal obligations, lawful object, capacity of parties, possibility of performance, etc.
Example: there is a Contract between X and Y and let us assume that their contract has all those above said features. It is Valid Contract.
Void: A Contract which is not enforceable in a court of law is called Void Contract. If a Contract is deficient in any one or more of the above features (Except free consent and legal formalities). It is called Void Contract.
Example: there is a Contract between X and Y where Y is a minor who has no capacity to contract. It is Void Contract.
Voidable: A Contract which is deficient in only free consent, is called Voidable Contract. That means it is a Contract which is made under certain pressure either physical or mental. At the option of suffering party, a voidable contract may become either Valid or Void in future. For example: there is a Contract between A and B where B has forcibly made A involved in the Contract. It is voidable at the option of A.
Illegal: If the contract has unlawful object it is called Illegal Contract.
Example: There is a contract between X and Z according to which Z has to murder Y for a consideration of 10000/- from X. It is illegal contract.
Unenforceable: A contract which has not properly fulfilled legal formalities is called unenforceable contract. That means unenforceable contract suffers from some technical defect like insufficient stamp etc. After rectification of that technical defect, it becomes enforceable or valid contract.
Example: A and B have drafted their agreement on 10/- stamp where it is to be written actually on 100/- stamp. It is unenforceable contract.
Void Contracts and Illegal Contracts
All illegal Contracts are void, but all void contracts are not illegal:An illegal Contract will not be implemented by court. So, illegal contract is Void. A void contract may not be illegal because its object may be lawful.
Void Contracts and Voidable Contracts
Becoming Valid: A Voidable Contract may become Valid at the option of suffering party. But a Void Contract can never and never become Valid
