Agreements under the Indian Contract Act, 1872

Agreement between two parties

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Agreement(s) are mutual understanding between two parties to perform an act or promise in exchange of some form of consideration. Agreements can be oral or written and requires atleast two parties. The idea of an agreement is to bring certainty to between the parties agreeing to perform an act or promise. In India, agreements are governed under the Indian Contract Act, 1872 and Agreement is defined under Section 2(e) of the Act.




 

AGREEMENTS

An agreement between two parties is said to be initiated with an offer. One of the parties make an offer to another, this offer is then accepted by the other party forming a promise, binding both the parties to the agreement.

Agreements are defined under Section 2(e) of the Indian Contract Act. The section states –

“Every promise and every set of promises, forming the consideration for each other, is an agreement”

So the essentials of agreement as per the above definition are –

  • Two parties
  • Proposal or Offer
  • Set of Promise
  • Consideration

So when two or more parties promises each other to do some act or abstains from doing any act then they are said to have form an agreement. These set of promises form consideration which is a fundamental of an agreement.

Let us discuss them in details –

  • Parties in an Agreement

An agreement can only be formed between two or more parties. So one of the essential of an agreement is presence of atleast two parties. Now, under the Indian law these two parties are referred to as the promisor and promisee. The person making the proposal/offer is known as the promisor and the person accepting the proposal/offer is called the promisee. Section 2(c) defines both the parties. It states –

“Every promise and every set of promises, forming the consideration for each other, is an agreement;”

  • Proposal or Offer

The initiation of an agreement is from a proposal. A proposal or an offer is said to be made when one party expresses to another their willingness to do an act or perform any promise. Proposal is defined under Section 2(a) of the Indian Contract Act, 1872. It states –

“When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;”

  • Promise

When the proposal made by one of the party is accepted by another party, then a promise is said to be formed. A promise is what binds both the parties to an agreement. Once a proposal is made and is then accepted (forming a promise) then the agreement becomes binding on both the parties. Then the agreement cannot be revoked and if revoked damages would have to be paid. Section 2(b) of the Indian Contract Act, 1872 defines a promise. It states –

“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;”

  • Consideration

When upon forming a promise, the promisee promises to perform some act or abstains from doing something, then this is called consideration. Consideration is an important essential of an agreement and without consideration no agreement can be said to exist. Consideration is defined under Section 2(d) of the Indian Contract Act, 1872 It states –

“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;”

KINDS OF AGREEMENT

Agreements can be classified into two types on the ground of enforceability. They are –

  • Valid Agreement and
  • Void Agreement

Valid Agreements are those agreements which can be enforced in courts. These are also known as contracts. For such agreements, parties can raise dispute against non performance of the counter party in an agreement. Contracts are defined under Section 2(h) of the Indian Contract Act, 1872.

If an agreement has all the necessary essentials then also it may or may not be a valid agreement. For an agreement to be a valid agreement it must fulfil the essentials of a contract.

Void Agreements are those agreements which are not enforceable by law. Section 2(g) defines Void Agreements.

There are certain agreements that are declared to be void according to the Indian law, they are –

·        Agreement in Restraint of Marriage

·         Agreement in Restraint of Trade

·         Agreement in Restraint of Legal Proceedings

·         An Agreement Whose Meaning is Uncertain

·         Wagering Agreements

·         Agreements to minor




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