1. Definition and Nature of Contract | Agreement vs. Contract

This is the first topic post in Unit I — General Principles of Contract. Read this before the other Unit I posts, since they build on the definitions here.

The Problem This Topic Solves

Every day you make promises — "I'll pay you back tomorrow," "I'll sell you my old phone for ₹8,000." Some of these promises the law will step in and enforce if broken. Others, it won't. This topic gives you the legal vocabulary to tell the two apart: what turns an ordinary promise into a legally binding contract.

A Brief History

Contract law in India comes from the Indian Contract Act, 1872, enacted on 25 April 1872 and brought into force on 1 September 1872. It was drafted during British rule and is heavily based on English common law principles of contract, later adapted through Indian case law and amendments. It remains the governing law today — Semester 1 covers Sections 1 to 75, the "General Principles" part of the Act (the Act's second part, on specific contracts like Indemnity, Guarantee, Bailment, and Agency, comes later in your course).

Building the Definitions — Step by Step

The Act defines contract-related terms in Section 2, and they build on each other in sequence:

1. Proposal (Offer) — Section 2(a). When one person signals to another their willingness to do or not do something, to get that other person's agreement to it, they are said to make a proposal. Example: A tells B, "I will sell you my bike for ₹20,000." A has made a proposal.

Offer vs. Invitation to Offer: Students often confuse a genuine offer with an invitation to offer — an invitation for others to make an offer, which cannot itself be "accepted." Example: goods displayed in a shop window with a price tag is an invitation to offer, not an offer — the shopkeeper isn't bound to sell just because you walk up with the marked price; you're the one making the offer when you try to buy, and the shopkeeper can still refuse.

2. Promise — Section 2(b). When the person to whom the proposal is made agrees to it, the proposal becomes a promise. Example: B replies, "Yes, I'll buy it." The proposal has now become a promise.

3. Promisor and Promisee — Section 2(c). The person making the proposal is the promisor; the person accepting it is the promisee. (A = promisor, B = promisee, in the example above.)

4. Agreement — Section 2(e). Every promise, and every set of promises forming consideration for each other, is an agreement. In short: Promise = Agreement (once there's something exchanged on both sides — this "something" is called consideration, defined next).

5. Consideration — Section 2(d). When, at the desire of the promisor, the promisee (or anyone else) has done, or does, or promises to do something — that act, or promise, is called consideration for the promise. Example: A promises to sell his bike to B for ₹20,000. The bike is A's consideration; the ₹20,000 is B's consideration. (Full depth on consideration — types, "no consideration no contract" rule, exceptions — comes in a later topic; this is the bare definition.)

6. Reciprocal Promises — Section 2(f). Promises that form the consideration, or part of the consideration, for each other are called reciprocal promises. Example: A promises to deliver goods, B promises to pay for them — each promise is consideration for the other, making them reciprocal promises.

7. Contract — Section 2(h). An agreement enforceable by law is a contract.

8. Void Agreement — Section 2(g). An agreement not enforceable by law is said to be void.

9. Voidable Contract — Section 2(i). An agreement enforceable by law at the option of one or more parties, but not at the option of the other(s), is a voidable contract. Example: an agreement caused by coercion or fraud — the wronged party can choose to enforce it or walk away.

10. Void Contract — Section 2(j). A contract that ceases to be enforceable by law becomes void (when it ceases to be enforceable).

(Points 8–10 are defined here since they're part of the same Section 2, but their full explanation — exactly what makes an agreement void or a contract voidable, coercion, fraud, misrepresentation, mistake — is Unit II's territory. Treat these three as vocabulary for now; the substance comes later.)

So the full chain, in the Act's own order, is: Proposal (a) → Acceptance (b) → Promisor/Promisee (c) → Consideration (d) → Agreement (e) → Reciprocal Promises (f) → Void Agreement (g) → Contract (h) → Voidable Contract (i) → Void Contract (j)

Agreement vs. Contract

Every contract is an agreement, but not every agreement is a contract. An agreement becomes a contract only when it satisfies certain legal conditions.

Section 10 lays down what those conditions are — the essential elements of a valid contract: the agreement must be made by the free consent of parties competent to contract, for a lawful consideration, with a lawful object, and must not be expressly declared void by law.

Breaking that down, a valid contract needs: 1. Offer and acceptance — a lawful proposal, lawfully accepted. 2. Intention to create legal relations — purely social/domestic promises (e.g. "I'll take you out for dinner") don't count.

3. Free consent — not caused by coercion, undue influence, fraud, misrepresentation, or mistake. 4. Capacity of parties — parties must be competent to contract (age, soundness of mind, not disqualified by law). 5. Lawful consideration — something of value exchanged, and it must be legal. 6. Lawful object — the purpose of the agreement must not be illegal or against public policy. 7. Not expressly declared void — the agreement isn't one the law specifically voids (e.g. agreements in restraint of marriage or trade).

An agreement missing any of these stays a mere agreement — it may still be morally binding, but a court won't enforce it.

• Section 2(a) — Proposal
• Offer vs. Invitation to Offer — a genuine offer can be accepted to form a contract; an invitation to offer cannot
• Section 2(b) — Acceptance / Promise
• Section 2(c) — Promisor and Promisee
• Section 2(d) — Consideration (bare definition — full depth later)
• Section 2(e) — Agreement
• Section 2(f) — Reciprocal Promises
• Section 2(g) — Void Agreement
• Section 2(h) — Contract ("an agreement enforceable by law")
• Section 2(i) — Voidable Contract
• Section 2(j) — Void Contract
• Section 10 — Essential elements of a valid contract
• Balfour v. Balfour — social/domestic agreements between spouses lack intention to create legal relations, so they aren't enforceable contracts
• The core distinction: all contracts are agreements, but all agreements are not contracts

Agreement vs. Contract — At a Glance

A Practical Example

Ravi promises his friend Suresh, "I'll help you shift your house this Sunday." This is an agreement — a social promise, no intention to create legal relations, so if Ravi doesn't show up, Suresh can't sue him.

Now, Ravi tells a moving company, "I'll pay you ₹5,000 to move my furniture on Sunday," and the company agrees. This satisfies Section 10 — offer, acceptance, intention to create legal relations, lawful consideration, competent parties, lawful object. This is a contract. If the company doesn't show up, Ravi has a legal remedy.

Quick Revision Points

• Proposal (2a) → Promise (2b) → Agreement (2e) → Contract (2h) — remember this chain
• Contract = Agreement + Enforceability by law
• Section 10 lists what makes an agreement enforceable: free consent, competent parties, lawful consideration, lawful object, not expressly void
• All contracts are agreements; all agreements are not contracts
• Social/domestic promises are usually agreements only, not contracts — no intention to create legal relations