Contract Law, Meaning, Components and Criteria for Valid Contract

In business, contract law plays a crucial role in shaping various aspects. It dictates how employees are recruited, how companies collaborate, and even how sales transactions occur.

What Is Contract?

Enroll Now for CA Courses

What Is Contract Law?

• How agreements are made
• What makes a document a valid contract
• Who can enter into contracts
• Penalties for breaking contracts
• The obligations of those who sign contracts

Components of Contract

Offer:

• The intention to enter into a contract: The offeror must express a genuine willingness to enter into a legal agreement.
• Identification of the parties: The offer should specify who is being invited to accept the offer.
• The subject matter: This includes what goods, services, or actions are being offered.
• Terms and conditions: The offer should outline any specific terms or conditions that the offeree must adhere to if they accept the offer.

Acceptance:

• Verbal or written acceptance: The offeree may explicitly agree to the terms orally or in writing.
• Implied acceptance through actions: Sometimes, acceptance can be inferred from the offeree's conduct or behavior. For example, if someone orders a product online and pays for it, their actions imply acceptance of the seller's offer.
• Performance: In certain situations, acceptance occurs through the performance of an act. For instance, when a supplier delivers goods to a restaurant, and the restaurant uses those goods to prepare meals, it's understood that both parties have agreed to the terms of the contract.

Consideration:

• Money: Payment for goods or services.
• Goods: Transfer of ownership or possession of tangible items.
• Services: Performance of a specific task or duty.
• Forbearance: W hen you choose not to do something you're legally allowed to do.

Criteria for Valid Contracts