Contract and Agreement

by • 28/05/2012 • B.com part 2 Business LawComments (0)687

Q1. Define the term contract and agreement. 

 

According to the Contract Act, 2872,

 

“An agreement enforceable by law is a contract.”

 

In other words, an agreement, which can be enforced in a court of law, is known as a contract. On analyzing this definition of contract, it appears that a contract must have the following two elements:

a-      An agreement

b-     Enforceability of an agreement.

 

In the form of an equation, it can be shown as under:

 

Contract = An agreement + Enforceability of an agreement

 

 

AGREEMENT:

According to section 2 (e) of the Contract Act, 1872:

 

“Every promise and every set of promises forming the consideration for each other is an agreement”.

 

Now the question arises, ‘what is promise’?

According to section 2 (b) of the Contract Act, 1872:

 

“A proposal when accepted becomes as promise”.

 

Example:

X offers to sell his car for Rs. 1, 00,000 to Y. Y accepts this offer. This offer after acceptance becomes promise and this promise is treated as an agreement between X and Y.

In other words, an agreement consists of an offer by one party and its acceptance by the other. In the form of an equation, it can be shown as under:

Agreement = Offer (or proposal) + Acceptance of offer (or proposal)

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