What is a Contract?

In our daily life, all of us enter into a contract at one step or the other without realizing that we are entering into a contract. For example, when we enter into a bus, we are making a contract or when we are buying bread and butter, we are entering into a contract of sale. Again, when we are leaving our watch for repair, we are entering into a contract of bailment.

Definition of Contract :

According to Salmond, a contract is “an agreement, creating and defining obligations between the parties.”

According to Pollock, “Every agreement and promise enforceable at a court of law is a contract.”

The Indian Contract Act has adopted the definition given by Pollock. It defines an agreement as “an agreement enforceable at law.”

From the above definition, it should be noted that a contract must have two essentials, viz., (i) an agreement, and (ii) enforceability at law.

Sec. 2(e) defines agreement or Promise

(A) “Every promise and every set of promises, forming consideration for each other, is an agreement.”

What is a promise? : or agreement.

Sec. 2(b) defines a promise as follows:

(B) “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.”

For an agreement, there must be two parties – one making the proposal and the other accepting it. One person alone cannot make the offer (proposal) and accept the same himself.

An agreement comes into existence when an offer made by one party is accepted by the other.

Algebraically:

Agreement = offer + acceptance.

Agreement means consensus ad-idem, i.e. parties agreeing on the same thing in the same sense at the same time. For example, A asks B, “Will you purchase my Maruti Car for Rs. One Lakh?” B says, “yes”, there is consensus ad-idem. On the other hand if A has two cars – a Maruti and a Fiat. He agrees to sell one of his cars to B. If A is thinking to sell his Fiat car and B is thinking to buy Maruti car, then A and B do not agree on the same thing in the same sense. There is no consensus ad-idem. Hence, there is no agreement.

An agreement becomes a contract if it is enforceable at a Court of law. Thus,

Contract = Agreement + Enforceability.