CONTRACT

An Agreement enforceable by law.

CONTRACT = AGREEMENT +

ENFORCEABILITY

Contracts = Legal Agreements

All Contracts are Agreements

All Agreements are not Contracts

AGREEMENT

AGREEMENT

Promise or set of promises forming any consideration.

KINDS OF AGREEMENT

Social Agreement

“A” agrees to go cinema with “B”.

Ali invites his friends at dinner.

Legal Agreement

Promise that creates legal relations

“A” agrees to sell his car to “B”

“A” agrees to transfer his property.

ESSENTIALS OF VALID CONTRACT

Three main components of a contract

Offer (Proposal)

Acceptance

Consideration

ESSENTIALS OF VALID CONTRACT

OFFER & ACCEPTANCE (AGREEMENT)

One person offers and other accept it.

Offer and Acceptance should be according to requirements.

“A” offers his house to “B” for 50 lac and “B” accepts the offer.

“A” advertise in newspaper his house for sale, is not an offer.

LAWFUL CONSIDERATION (RETURN)

Offer and Acceptance have some consideration (Give & Take).

Consideration be lawful, legal and real.

“A” offers his house to “B” for 50 lac and “B” accepts the offer.

Here: Price is consideration for “A” and house for “B”.

ESSENTIALS OF VALID CONTRACT

WRITTEN & REGISTERED

Agreement should be Written and Registered.

Should be signed and attested by the witnesses.

“A” promises orally to “B” to sell his book. (No need of Writing)

Father designed will to distribute the property in his sons.

LEGAL RELATIONSHIP

Relation between the parties of agreement should be legal.

Parties are bound to perform the obligations.

“A” agrees to go cinema with “B”. (Social Relation)

“A” agree to sell his house to “B”. (Legal Relation)

CONTRACT BY ENFORCEABILITY

VALID CONTRACT

When agreement fulfills basic essentials of contract.

Any party breaches agreement, can file suit against him.

“A” promises to sell his car to “B” for Rs. 500000.

Pakistan promises to pay debt till December 2016.

VOID CONTRACT

Agreements that are not enforceable by law.

Agreements are void a. b. initio (Not applicable by birth)

“A” promises to kill “B” for Rs. 500000.

An insolvent person promises to pay credit.

VOID AGREEMENT VS VOID CONTRACT

VOID AGREEMENT

An agreement that is unenforceable from its formation.

Parties are not competent.

Consideration is unlawful

Object is unlawful

“A” promises to buy bike from “B” who is a minor.

Agreement of Smuggling or Corruption.

VOID AGREEMENT VS VOID CONTRACT

Void Contract

Agreements That Are Valid At The Time Of Its Formation.

With The Passage Of Time Become Unenforceable.

Legally Impossible To Perform

Change In Law Before The Performance.

Physically Impossible To Perform

Subject Matter Is Destroyed Or Theft.

Rejection Of Voidable Contract

Party Refuse To Perform When Consent Is Not Free

VOID AGREEMENT VS VOID CONTRACT

1. A void agreement is not prohibited by law.

2. A void agreement is not punishable.

3. A void agreement is not illegal agreement.

4. The object of void agreement is not illegal.

5. A collateral agreement to a void agreement is enforceable.

6. In void agreement the money received must be returned to the other party.

VOID AGREEMENT VS VOID CONTRACT

7- Enforceability:

A void agreement is not enforceable by law.

8- Defects:

A void agreement is not void ab-initio and its defects cannot be removed.

9- Rights of third party:

In a void agreement a third party who buys goods in good faith and for consideration does not acquire any rights.

VOID AGREEMENT VS VOID CONTRACT

10- Compensation:

In a void agreement the person is not entitled to compensation for loss arising due to non-performance of the agreement.

11- Collateral agreement:

A collateral agreement to void agreement is not enforceable by law.

12- Laps of time:

It can never become a valid contract on the expiry of reasonable time.

13-Free consent:

It is void due to lack of any essentials of a valid contract except free consent.