Define a contract. Explain the essentials of a valid contract.

A contract is a voluntary legally binding agreement between two or more parties.
 Contract is a branch of the law
of obligations in jurisdictions of the civil
law tradition. Contract law is concerned
about the rights and duties that results from agreements.

All contracts are agreement but not all
agreement is contract.

Only that agreement that is enforced by
law is contract.

For an agreement to be legally valid
must have the essentials of valid contract as per section 10 of the Indian contract
act.

According to section 10 “ All agreements
are contracts if they are made by the free consent of parties, competent to
contract, for a lawful consideration and with a lawful object and are not
expressly declared to be void” 

Essentials of Valid Contract:

1. Offers and Acceptance: For a contract
to be valid there must be a lawful offer by one party and lawful acceptance by
another party.

2.  Legal Relationship: For a agreement to be valid, the parties must
create legal relationship. For Agreement of
social or domestic nature, legal relationship is not considered.

3.   Lawful Consideration:  Consideration
has been defined as the price paid by one party for the promise of the other. An
agreement is enforceable only when both the parties get something and give
something.

 4.  Capacity of Parties:  Parities
to an agreement must be capable to contract. Even if one of the parties is
not capable of contract, then the contract is invalid.

 5.  Free Consent: The parties must
agree upon same thing in the same sense.

 6. Lawful Objects: Object of an
agreement must be valid. It means the design of the contract.

7.  Writing and Registration: A contract may
be oral or in writing according to Contract Act. It is required
for the validity of a contact that the agreement must be in writing and signed
and attested by witness and registered if so required by the law.

8. Certainty: According to Section 29 of the Contract Act,
“Agreements the meaning of which are not certain or capable of being made
certain are void.”

9. Possibility of Performance:
According to section 56 lays “An agreement to do an act
impossible in itself is void.”

 10. Not Expressly Declared Void: Condition for the contract should be
capable of performance.

"A stranger to contract cannot sue". Explain. Discuss the exceptions to this rule.

Introduction

           A contract is an agreement between two or more persons/parties subject to certain terms and conditions for a lawful consideration. Indian Contract Act defines Contract as "an agreement enforceable by law."  For example,  X and Y enter into an agreement. X promises Y to Sell his Car for Rs.5,00,000/- and Y accepts to purchase it for the said amount. It is a Contract between X and 'Y'.      The general rule is that only those person who are parties to a contract may sue and be sued on that contract. Any person other than the parties/ persons to a contract is called "Stranger to the Contract"    That means in the above example X and Y may sue and be sued. There are two consequences of this rule:

        1) A person who is not a party to a contract cannot sue upon it even though the contract is for his benefit and he provided consideration. This rule is known as the Doctrine of Privity of contract. Privity of contract means a relationship subsisting between the parties who have entered into contractual obligations. It implies a mutuality of will and creates a legal Bond or tie.

2) A contract cannot confer rights or impose obligations arising under it on any person other than the parties to it. Thus, if there is a contract between A and C, C cannot enforce it.

Exceptions to the Doctrine of Privity of Contract:

      The following are the exceptions to the doctrine Privity of Contract.In other words "a stranger to a contract can sue.


1) A trust or charge :

                   A person in whose favor a trust or other interest in some specific immovable property has been created may enforce it even though he is not a party to the contract

Example :

a) A agrees to transfer certain properties to B to be held by B in trust for the benefit of C. C can enforce the agreement (I.e, trust) even though he is not a party to the agreement

b) A husband who was separated from his wife executed a separation deed by which he promised to pay to the trustees all expenses for the maintenance of his wife. In this case, court held that the agreement created a trust in favour of the wife and could be enforced.   [Gundy Vs Gundy (1884)]

c) A had a son SA and B had a daughter DB. A agreed with B that in consideration of the marriage of DB with SA, he would pay to DB, his daughter in law an allowance of 5000 a month in perpetuity. He charged certain properties with the payment with the power to DB to enforce it. In this case, court held that, DB although no party to the arrangement, was clearly entitled to recover the arrears of the allowance. [Khwaja Mohd. VS Husaini Begum (1910)]



2) Marriage settlement, Partition or other family arrangements : 

           Where an agreement is made in connection with marriage, partition or other family arrangements and a provision is made for the benefit of a person, he may sue although he is not a party to the arrangement

Examples:

      a) Two brothers on a partition of joint properties agreed to invest in equal share a certain sum of money for the maintenance of their mother. In this case, she( Mother ) was entitled to require her sons to make the investment.

     b) J's wife deserted him because of his ill treatment. J entered into an agreement with his father in law to treat her property or else pay her monthly maintenance, subsequently, she was again ill treated and also driven out, here she was entitled to enforce the promise made by J to her Father.

3) Acknowledgement or estoppel

          If the promisor by his conduct or acknowledgment or part payment or by estoppel creates privity of contract between himself and the stranger, the stranger can sue.

Example:  A receives some money from B to be paid over C. A admits of this receipt to C. C can recover the amount from A who shall be regarded as the agent of C. 

4)  Assignment of a contract

    If the benefits under the contract are assigned to the third party, the assignee can sue.

Example : 

Krishnan Lal Sahu Vs. Promila Bala, A.I.R (1928) 518 cal. In this case, Court held that "the assignee of rights and benefits under a contract not involving personal skill can enforce the contract subject to the equities between the original parties.

5) Contracts entered into through an agent
  
         In a contract of Agency, a person appoints another person to act on his behalf with a third party. The person who appoints another person is called 'Principal' and the person, who is appointed is called 'Agent'. When an agent enters into a contract on behalf of the principal, the principal can enforce the contract.( here Principal is a stranger to the Contract; the agent and other parties are parties to the Contract.
      


[Note: A stranger to  Contract cannot sue. But, a stranger to Consideration can sue. Both have exceptions.]

Explain the remedies available to an aggrieved party on the breach of a contract.

Breach of Contract :-
Breach means violation of law. The breach of contract means to break the contract or not to act upon the contract. When any party fails to perform its duties in a lawful contract it is called breach of contract. The injured party has a right to take action against the party who has failed to perform his part of contract.


REMEDIES or RIGHTS OF AGGRIEVED PARTY :-
On the breach of contract following remedies are available to an injured party.


1. Claim for Damages :-
If contract is broken, the injured party has a remedy to claim for damages and losses suffered by him. Injured party is entitled to receive compensation of loss from the party who has broken the contract.The aim of this remedy is to provide the injured party the same benefits which it would receive in case of the performance of contract.

Following are important types of damages :


i. :- Special Damage :- Under a special circumstances special damages takes place from breach of contract.

Example :- If the machinery of any factory arrives late and due to this reason one party suffers a loss or profits it is called special damage.


ii. General Damage :- If injured party suffers a loss due to non performance of the contract it is called general damage. The injured party can recover from the guilty party the ordinary damages suffered by him.

Example :- Mr. Robin contracts to pay 3 lac to Mr. Peter on 1st April. Mr. Robin does not pay the money on that day. Mr. Peter is unable to pay her debts and suffer a loss. Mr. Robin is liable to pay Mr. Peter principal amount and also interest on it.


iii. Exemplary Damages :- These damages are awarded in order to punish the guilty party for the breach of contract and not to compensate the loss of the injured party.

These damages are awarded in dishonor of cheque and case of breach of contract to marry.


iv :- Nominal Damages :- When the injured party suffers no loss the contract may award him nominal damages to recognize his right.


2. Suit For Injunction :-
Injunction means the order of the court. It may be used to prevent any wrongful act. In case of contract it is used to prevent that act which is involved in breach of contract.

Example :- Suppose Mr. Yuvraj a film producer contracts with Miss. Neha to sign in his movies for ten years and not to sign in any other film. After one year she contacts with other film producer Mr. Sethy during the period of contract. The court may issue injunction on a suit by Mr. Yuvraj to restrain Miss. Neha from signing in film of Mr. Sethy.


3. Specific Performance :-
A degree of specific performance is an order of the court. It is usually granted in those contracts related to house, land and plot. In some cases compensation to pay. So court may issue the degree of specific performance and can compel to defaulter party the performance of contract.

Example :- Mr. Tipu agrees to sell his house to Mr. Amir, who agrees to purchase. But due to some reasons Mr. Tipu commits breach . At the suit of Mr. Amir court may ask Mr. Tipu to carry out the contract.


4. Recession Of The Contract :-
For the breach of contract it is an equitable remedy. When one party of the contract commits breach and other party may rescued the contract that he may get free from all its obligations for the performance of contract. Due to such recession and non performance injured party is entitled to get compensation for the damages and loss.

Example :- Mr. Sanjay pledges the defence savings certificates to Mr. Panday and get loan. But Mr. Sunjay does not return the loan. Mr. Panday may file a suit for recession of the contract responsibility to return the defence savings certificates on payment.


5. Quantum Merit :-
It means"So much as deserves" we can explain it by the following example :

Example :- Suppose Mr. Ali entered into contract with Mr. Shawn that they will construct one room jointly. Mr. Ali will construct the wall while Mr . Shawn will build the roof. Now Mr. Ali completes his job but Mr. Shawn fails to build the roof of the room. Now in this case Mr. Ali is entitled to receive the award according to his work done by him.This claim of Mr. Ali will be called a claim of "Quantum Merit." The court will award to Mr. Ali keeping in view the work or services performed by him.

"A stranger to contract cannot sue". Explain. Discuss the exceptions to this rule.

Naresh offers to sell his car to Mukesh for 4 1,50,000. Mukesh replies "I will pay 1,20,000 for it." Naresh refuses to sell at this price. Mukesh then offers to pay 1,50,000 to Naresh. But Naresh refuses to sell his car. Can Mukesh sue ? Give reasons.