Contract :-
The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by the law of the land.
This definition has two major elements in it that is – “agreement” and “enforceable by law”. So in order to understand a contract in the light of The Indian Contract Act, 1872 we need to define and explain these two pivots in the definition of a contract.
Agreement :-
In section 2 (e), the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”.
Now that we know how the Act defines the term “agreement”, there may be some ambiguity in the definition of the term promise.
Promise :-
The Act in its section 2(b) defines the term “promise” here as: “when the person to whom the proposal is made signifies his assent thereto, the proposal becomes an accepted proposal. A proposal when accepted, becomes a promise”.
In other words, an agreement is an accepted promise, accepted by all the parties involved in the agreement or affected by it. This definition says that in order to establish or draft a contract, we need to initiate some steps:
The definition requires a person to whom a certain proposal is made.
The person (parties) in step one has to be in a position to fully understand all the aspects of a proposal.
“signifies his assent thereto” – means that the person in point one accepts or agrees with the proposal after having fully understood it.
Once the “person” accepts the proposal, the status of the “proposal” changes to “accepted proposal”.
“accepted proposal” becomes a promise. Note that the proposal is not a promise. For the proposal to become a promise, it has to be an accepted proposal.
To sum up, we can represent the above information below:
Agreement = Offer + Acceptance.
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