ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS.

ALL CONTRACTS ARE AGREEMENTS BUT ALL AGREEMENTS ARE NOT CONTRACTS

All contracts are agreements but all agreements are not contracts. Explain this statement. Ads

INTRODUCTION:
                             No doubt it is a valid and true statement. Before critically examining the statement,we must know the exact and basic meanings of the two terms contract and agreement in the context of business law. For understanding the meaning, we will have to go to the contract act 1872 that is applicable in subcontinent.
              A contract is a legally binding agreement or relationship that exists between two or more parties to do or abstain from performing certain acts. There must be offer and acceptance for a contract . An offer must backed by acceptance of which there must be consideration. Both parties involved must intend to create legal relation on a lawful matter which must be entered into freely and should be possible to perform.
            
Definition of contract
According to section 2(h) of the  Contract Act 1872:
 " An agreement enforceable by law is a contract."
A contract therefore, is an agreement the which creates a legal obligation i.e., a duty enforceable by law.
From the above definition, we find that a contract essentially consists of two elements:
(1) An agreement and (2) Legal obligation i.e., a duty enforceable by law.

Example;

A promises to sell a horse to B for Rs.100,000, and B promises to buy horse at that price.

All contracts are agreements:
 For a Contract to be there an agreement is essential; without an agreement, there can be no contract. As the saying goes, "where there is smoke, there is fire; for without fire, there can be no smoke". It could will be said, "where there is contract, there is agreement without an agreement there can be no contract". Just as a fire gives birth to smoke, in the same way, an agreement gives birth to a contract.

What is agreement?

An agreement is a form of cross reference between different parties, which may be written, oral and lies upon the honor of the parties for its fulfillment rather than being in any way enforceable. 

As per section 2 (e) of Contract At 1872:
 " Every promise and every set of promises, forming the consideration for each other, is an agreement." Thus it is clear from this definition that a 'promise' is an agreement.

What is a 'promise'?
 the answer to this question is contained in section 2 (b) which defines the term." When the person to whom the proposal is made signifies his assent thereto the proposal is said to be accepted. A proposal, when accepted, becomes a promise."
An agreement, therefore, comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent thereto. 

All agreements are not contracts
  As stated above, an agreement to become a contract must give rise to a legal obligation. If an agreement is incapable of creating a duty enforceable by law. It is not a contract. Thus an agreement is a wider term than a contract. 
     Agreements of moral, religious or social nature e.g., a promise to lunch together at a friend's house or to take a walk together are not contracts because they are not likely to create a duty enforceable by law for the simple reason that the parties never intended that they should be attended by legal consequences
       On the other hand, legal agreements are contracts because they create legal relations between the parties.
EXAMPLE: a- A invites B to dinner. B accepts this invitation but does not attend the dinner. A can not sue B for damages. It is social agreement because it does not create legal obligation. So it is not a contract.

b- A promises to sell his car to B for one million. It is legal agreement because it creates legal obligations between the parties. So it is a contrac
According to section 10 of the contract act 1872,
                                                                          "All agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration and with a lawful object and not hereby declared to be void."
    Thus an agreement becomes a contract when at least the following conditions are satisfied.
1-free consent
2-competency of the parties
3-lawful consideration
4- lawful object.

Conclusion:
                  In a nut shell, an agreement is the basis of a contract and contract is the structure constructed on these basis. An agreement starts from an offer and ends on consideration while a contract has to achieve an other milestone that is enforceability. Due to this, breach of an agreement does not give rise to any legal remedy to the aggrieved party while breach of contract provides legal remedy to the aggrieved party against the guilty party. Thus we can say that all contracts are agreements but all agreements are not contracts.

Road map of a contract:
                                    OFFER                   + ACCEPTANCE                      = PROMISE
                                    PROMISE              + CONSIDERATION                = AGREEMENT
                                    AGREEMENT        + LEGAL OBLIGATION          =CONTRACT

CONTRACT

Question: Define contract, what are the essentials of a contract?

Answer:
            Introduction: The security and stability of business world depend upon the law of contract. Indeed the basis of trade and commerce today is the enforceability  of promises, very often contracts are made at one time and the performance is to follow latter, there should be legally enforceable obligation to perform the agreement.
  Definition:
                Literally: The word contract comes from a Latin word"Contractus" which means consent, agreement or to enter into an agreement with a particular person.
Traditionally: Salmond says , "A contract is an agreement creating and defining obligations between the parties"
Sir John Smith says,"A voluntary, deliberate and legally binding agreement between competent parties."
Example: Asif says to Hamid,"Will you purchase my car for Rs.500000?.it is an offer, Hamid says yes, the offer is accepted and a contract is formed.

Contract law in Pakistan
                                          The law relating to contracts in Pakistan is contained in Contract Act 1872. It extends to whole Pakistan and came in to force on the first day of September 1872. It provides rules relating to commercial transactions. It determines the circumstances in which promises made by the parties shall be legally binding on them.
According to Contract Act1872:
                                            Section 2(h) defines contract as,"An agreement enforceable by law is a contract"
A contract consists of two elements, 1- Agreement    2- Enforceability.
  Agreement: Section 2(e) defines the term agreement as," every promise and set of promises forming the consideration for each other is an agreement."
Now what is promise? Section 2(b) says,"when the person to whom the proposal is made, signifies his assent thereto,the proposal is said to be accepted, a proposal, when accepted becomes a promise"

ENFORCEABILITY:
Enforceability is the second requirement of the contract. An agreement is enforceable if it is recognized by the courts of law. In order to be enforceable by law, the agreement must create legal obligation between the parties.
ESSENTIALS OF A VALID CONTRACT
A contract has been defined in section 2(h) as "an agreement enforceable by law." To be enforceable by law, an agreement must possess the essential elements of a valid contract as contained in sections 10, 29 and 56. According to section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and where necessary, satisfy the requirements of any law as to writing or attention or registration. As the details of these essentials form the subject matter of our subsequent chapters, we propose to discuss them in brief here.
The essential elements of a valid contract are as follows.
1. Offer and acceptance. There must a 'lawful offer' and a 'lawful acceptance' of the offer, thus resulting in an agreement. The adjective 'lawful' implies that the offer and acceptance must satisfy the requirements of the contract act in relation thereto.
2. Intention to create legal relations. There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations.
Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. An agreement to dine at a friend's house in not an agreement intended to create legal relations and therefore is not a contract. Agreements between husband and wife also lack the intention to create legal relationship and thus do not result in contracts.
Try to work out the solution in the following cases and then go to the answer.
3. Lawful consideration. The third essential element of a valid contract is the presence of 'consideration'. Consideration has been defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something and gets something. The something given or obtained is the price for the promise and is called 'consideration' subject to certain exceptions; gratuitous promises are not enforceable at law.
The 'consideration' may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. It may be past, present or future. But only those considerations are valid which are 'lawful'. The consideration is 'lawful'. unless it is forbidden by law; or is of such a nature that, if permitted it would defeat The provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or is immoral; or is opposed to public policy (sec.23).
4. Capacity of parties. The parties to an agreement must be competent to contract. But the question that arises now is that what parties are competent and what are not. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject (sec.11). If any of the parties to the agreement suffers form minority, lunacy, idiocy, drunkenness etc. The agreement is not enforceable at law, except in some special cases e.g., in the case of necessaries supplied to a minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate (sec 68).
5. Free consent. Free consent of all the parties to an agreement is another essential element. This concept has two aspects.(1) consent should be made and (2) it should be free of any pressure or misunderstanding. 'Consent' means that the parties must have agreed upon the same thing in the same sense (sec. 13). There is absence of 'free consent,' if the agreement is induced by (i)coercion, (ii) undue influence, (iii) fraud, (iv) mis-representation, or (v) mistake (sec. 14). If the agreement is vitiated by any of the first four factors, the contract would be voidable and cannot be enforced by the party guilty of coercion, undue influence etc. The other party (i.e., the aggrieved party) can either reject the contract or accept it, subject to the rules laid down in the act. If the agreement is induced by mutual mistake which is material to the agreement, it would be void (sec. 20)
6. Lawful object. For the formation of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must mot imply injury to the person or the other of the reasons mentioned above the agreement is void. Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution, he cannot recover the rent through a court of law or a contract for committing a murder is a void contract and unenforceable by law.
7. Writing and registration. According to the Indian contract Act, a contract to be valid, must be in writing and registered. For example, it requires that an agreement to pay a time barred debt must be in writing and an agreement to make a gift for natural love and affection must be in writing and registered to make the agreement enforceable by law which must be observed.
8. Certainty. Section 29 of the contract Act provides that " Agreements, the meaning of which is not certain or capable of being made certain, are void." In order to give rise to a valid contract the terms of the agreement must not be vague or uncertain. It must be possible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced
Illustration. A, agrees to sell B " a hundred ton of oil" there is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainly.
9. Possibility of performance. Yet another essential feature of a valid contract is that it must be capable of performance.
Section 56 lays down that "An agreement to do an act impossible in itself is void". If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law.
Illustration. A agrees with B, to discover treasure by magic. The agreement is not enforceable.
10. Not expressly declared void. The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly declared to be void. For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an agreement by way of wager have been expressly declared void under sections 26, 27 and 30 respectively.

QUASI CONTRACTS

QUASI CONTRACTS

Q: Explain in detail what is Quasi Contract? Also explain its different kinds Under contract act 1872.

Introduction:

                   Most of us are familiar with the term contract , which refers to a legal agreement that binds the parties with duties and obligations. The contracting parties agree to the conditions of the contract, either orally or in writing and such contracts are enforceable in a court of law. .in order to be classified as a valid contract, there must be an offer, acceptance between the parties for a valid consideration; however, there is one type of contract wherein these factors are not needed for the formation of the contract. There is not contract between the parties, till the court creates it. these are quasi contracts that are created by courts to prevent one party from getting   unjust enrichment at the expense of the other.

What does quasi contracts mean.

Denotative meanings:

                    Quasi is a Latin word for “as if, almost, somewhat, to a degree and analogous to”

Connotative meaning:

                            A quasi contract is an obligation invoked by law in the absence of an agreement. Its purpose is to create a legal duty where, in fact, no agreement was entered into by the parties. Quasi contracts are based on the principle of equity and justice. It simply states that no body shall enrich himself unjustly at the expense of another.

Example:

            A is knocked down by a vehicle. B, a stranger, who found A on the road in unconscious state, takes A to doctor. The doctor provides treatment to A, who is In a unconscious state. In such a situation, there is no contract between A and doctor and A claims that he is not liable to pay for the services offered by the doctor, as he was unconscious at the time of treatment and there is no agreement between the two.

Application:

                   In such a situation, the theory of quasi contract applies. In this case the doctor has spent his valuable time for the treatment of accident victim(A) and so, A is liable to pay for the services of the doctor. If A fails to do so, the court can apply the doctrine of quasi contract and order A to pay. This is to prevent the unjust enrichment of A at the expense of doctor.

Liability:

             The main question that arises in such situations is the liability of the defendant. As the aim of this doctrine is to prevent unjust enrichment of one party, at the expense of the other,

The damages are usually restricted to the value of services rendered or the cost of the goods delivered. If the damages exceed that value, the whole concept of quasi contract will be defeated, as it will be unfair for the defendant.

Under contract act 1872

                                      Section 68 to 72 deals with “certain relations resembling those created by contract” under the contract act 1872.There are five kinds of quasi contractual obligations for which brief discussion is discussed below.

	Maqsood Ahmed 00923333424200

 

1.Supply of necessaries (sec. 68)

                                                      If necessaries are supplied to a person who is incompetent to contract or to someone whom he is legally pound to support, the supplier is entitled to recover the price from the property of the incompetent person. The necessaries must be suited to conditions of life of the incompetent person.

  Example1: A supplies B, a lunatic, with necessaries suitable to his conditions in life. A is entitled to be reimbursed from B’^s property.

  Example 2: A supplies the wife and children of B, a lunatic with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’^s property.

2. Payment by an interested person: (sec. 69)

                                                                             “A person who is interested in the payment of money which another is bound by law to pay, is entitled to be reimbursed by the other.”

Example:

The conditions of liability under this section are:

1. Plaintiff should be interested in making payment to protect his interest. The interest should be legally recognizable.
2. It is necessary that the plaintiff himself should not be bound to pay.
3. The defendant should have been ‘bound by law’ to pay the money.
4. The plaintiff should have made the payment to another person.    

Example:

              A holds land on lease granted by B,  the zamindar. The revenue payable by B to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue law, the result of such sale will be the annulment of A’^S lease. A wants to prevent the sale and his own lease, pays the sum due from B. B is bound to make good to B the amount so paid.

3. Liability to pay for non-gratuitous acts:  (sec. 70)          

Section 70 states, ”where a person lawfully does anything for any other person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of or to restore the thing so done or delivered.”

Example:

              A, a tradesman, leaves goods at B’^s house by mistake. B treats the goods as his own. He is bound is bound to pay A for them.

Example:

    A saves B’^s property from fire. A is not entitled to compensation from B, if circumstances show that he intended to act gratuitously.

4. Responsibility of finder of goods: (sec.71)

                                                                    “A person who finds goods belonging to another and takes them into his custody, is subject to the same as a bailee.”

Thus in respect of duties and liabilities, a finder is treated as bailee.

 The rights of a finder of goods include the following:

1. He can sue the owner for the specific reward announced for the return of goods and recover the reward.
2. He is entitled to recover his lawful charges incurred in preserving the goods and in order to find the true owner.
3. He can sell the goods if

 a-The goods are perishable in nature.

 b-His lawful charges exceed two third of the value of goods.

 c- When after due search, the true owner can not be found.

 d- Even if the true owner is found out, but he refuses to pay the lawful charges to the finder.

5. Mistake or Coercion (sec.72)

                                                        sec. 72 states, “A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it.”

 Example:

    A and B jointly owe Rs. 100 to C. A alone pays the amount to C, and B, not knowing this fact pays Rs. 100 again to C. C is bound to repay the amount to B.

Money paid under mistake is recoverable whether the mistake is of fact or law.

Example:

                A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charges as was illegally excessive.       end