CONTRACTS IN OUR DAY TO DAY LIFE (Part 2)

Why enter into a contract?

Contract defines the obligations and the mutual expectations of the parties involved in the contract. Written Contracts are reference points that help the parties to refer to the promises made by all the parties to the contract. The promises may be with respect to the type of material to be used, the price to be paid, the service to be delivered, the time and place of fulfilling the promises. Contract also speaks about how to resolve disputes in case they arise in future.

 In case of contract which lasts for longer time it is always recommended to write it down. Contracts such as rental agreements are often written and also registered with authorities. Written contracts also serve as reference documents, which can be referred by any parties to the contract.

Essentials of a contract?

For any contract to be valid, it should fulfill all the  essentials, only upon fulfillment of which the law subsists the remedy. For a contract to be valid, it must be entered by persons who have capacity to contract. This means both the parties should have attained the age of majority to be eligible to enter into contract. Therefore, you cannot buy property in the name of your minor child, or rent your house in the name of a minor child. The other essential is that there should be acceptance of the offer and a valid consideration. A contract has to be between two or more persons and there has to be an offer and acceptance of mutual expectations in a contract. For eg. a contract of employment defines the expectation of employer from the employee. These are written in the form of duties of the employee. And the expectation of the employee from the employer is written as duties. While the employee has to perform the tasks given by the employer, the employer has to pay the salary as decided to the employee.

Types of contracts

Every day we enter into several contracts, some consciously and some out of habits. Buying grocery, vegetables, buying milk where you settle bill at the end of month etc are all contracts. This means that contracts can be either written or oral or express or implied.

A written contract is a document where the rights and duties of all the parties to the contract are laid down in black and white form. Oral contracts are the ones where promises are made orally. Express contracts are the ones where the parties enter into contract with all the terms and conditions laid down and as agreed by parties. Implied contracts are the contract where one party does an act or things because of which he creates an obligation. For example when you flag an auto or taxi on a busy road and the auto or cab driver stops , you tell him the address and he signals you by opening his auto door or with a nod , it becomes a implied contract. Here the driver binds himself to drop you at your given address and you agree to pay to the driver the fare for your ride.

Except for written contracts, other contracts have to relied upon the Indian Evidence Act, 1872 to prove the existence of the contract and the obligations arising from them.

Special contracts

These are the contracts that are defined in the Indian contract Act 1872. These are contracts of guarantee, contracts of bailment and pledge, contracts of agency. Also the sale of goods is the contract, which was initially a part of the Indian Contract Act 1872, but was later separated to form into an independent act called the Sale of goods Act, 1930.

We enter into special contracts when we mortgage our property against our housing loan or when we hypothecate our inventory against a cash credit facility received for our business from the bank or when we promise to act on behalf of someone else as an agent.

Regards,

Adv. Dr. Rajkumar Adukia.