What is an Agreement?
An Agreement is one of the most important aspects of our daily life. Consciously or subconsciously, we enter into several agreements daily. Since an agreement confers various rights and obligations upon parties, it is very important to understand the type of agreement to protect our rights.
Agreement can be defined as an acceptance in response to an offer given by one party to another. As per the provisions of the act, The agreement comes into existence when an individual or an entity makes an offer or proposal to a second individual or entity, and the offer is accepted with all the required conditions.
Section 2(e) of the Indian Contract Act, 1872 defines an agreement as, “Every promise and every set of promises, forming the consideration for each other.”
Agreement = Offer + Acceptance
Table of Content
Essentials of Forming an Agreement
1. Two or more Parties: There must be at least two or more parties in order to form a valid agreement.
2. Offer or proposal: The proposal must be made by one party to the other party. The person making the proposal is called a Proposer or an Offeror.
3. Clear and Concise: The person or persons to whom the proposal has been made must be clear and concise. In addition, the terms and conditions of the proposal should be easily understood by all the parties without any ambiguity.
4. Acceptance: The offeree or the person to whom the offer has been made, must accept the proposal and give his/her assent to all its terms, in case the consent is not given the agreement will lose the character of validity.
5. Promise: When the proposal is accepted it becomes an accepted proposal or a promise. A proposal is not the same as a promise but becomes one only after its acceptance.
6. Consideration: A consideration is the price for the promise made or the performance which is done, the consideration is to be paid for the agreement to be considered as accepted.
The two main features of an agreement are:
- Two or more parties: A minimum of two persons or entities should be there in order to form an agreement. A single person or entity cannot enter into an agreement.
- Consensus ad-idem: It is a Latin term that means ‘meeting of minds’. It further mentions that all the parties involved in an agreement should agree upon the same thing in the same sense as it is meant. For example, A offers to sell his car to B for ₹2,00,000. So, when B accepts the offer, it becomes an agreement.
Types of Agreement under Contract Law
1. Valid Agreement
A valid agreement is one that is enforceable by law. After getting legal enforceability, it shall become a contract and make the parties to the agreement binding to the conditions.
In order for an agreement to be valid, it has to fulfil certain essential conditions such as:
- An agreement shall have a valid consideration.
- Parties shall be competent to contract as per the provisions of the act.
- Consent of the parties must be free and not influenced in any way.
- An object of the agreement must be lawful.
2. Wagering Agreement
It is a kind of agreement where the first party promises to pay the second party on the occurrence of a certain event and in return, the second party agrees to pay to the first party on the non-happening of an event. As per the provisions, all wagering agreements fall under Section 30 and are considered void.
The following elements must be present in a wagering agreement:
- Both parties should have an equal opportunity to win or lose.
- The event on which the wager is done should be out of the control of both parties.
- The only interest of the parties should be to win or lose and no other motive should be present.
- The wager agreement fully depends on the happening of the futuristic event.
- Both parties must promise to pay money or the consideration as per the terms and conditions of the agreement.
3. Contingent Agreement
Contingent agreement is executed on the basis of a promise which is contingent on the happening or non-happening of an uncertain future event. For example, X promises Y to pay ₹2000, in case there is water damage to X’s house.
The essentials of a contingent agreement include:
- The contract must be valid to do or abstain from doing something.
- The condition for which a contract has been entered into must be a future event and uncertain.
- The event on the basis of which agreement is formed should not be a part of the collateral.
- The event must not be dependent on the promisor.
4. Voidable Agreement
A voidable agreement is an agreement that may be revoked by either of the parties to the agreement due to various legal reasons. Such an agreement, when enforceable by law is termed as a contract voidable at the option of a party.
5. Express and Implied Agreements
Section 9 of the act defines the term Express and Implied promises. It mentions that any promise made through words by the parties shall be considered an express promise and any promise made apart from words shall be considered an Implied promise.
6. Illegal Agreements
Any agreement that is against the provisions of the law in force in India shall be termed as an Illegal agreement. Either of the two conditions, illegal object or illegal consideration shall make the agreement illegal. Even if the agreement mentions performing an illegal act, it shall still be considered as an Illegal agreement.
Conclusion
The various kinds of agreements mentioned under the Indian Contract Act, 1872 are very crucial and important in the daily life of each and every person. An understanding of the types of agreements will help the parties to protect their rights and discharge their duties per the law. It should always be noted that an agreement should only be entered if such an agreement is enforceable in a court of law. The court denies providing relief to the parties stating the absence of legal enforceability in the agreements.
Agreement under Contract Law- FAQs
What is an Agreement?
Section 2(e) of the Indian Contract Act, 1872 defines an agreement as, “Every promise and every set of promises, forming the consideration for each other.”
What are the essentials in forming an agreement?
- There must be at least two parties
- The offer must be made
- There must not be any ambiguity
- Acceptance, Promise, and Consideration must be present
What are the types of agreements?
Different types of agreements are Valid Agreement, Void Agreement, Wagering Agreement, Contingent Agreement, Voidable Agreement, Express and Implied Agreements, and Illegal Agreement.
Explain the Indian Contract Act, 1872.
The Indian Contract Act, 1872 prescribes the law relating to contracts in India and regulates Indian contract law. The act is based on the common law and determines the circumstances in which promises made by the parties to a contract shall be legally binding.
Define Agreement in simple terms.
In simple words, Agreement = Offer + Acceptance
Note: The information provided is sourced from various websites and collected data; if discrepancies are identified, kindly reach out to us through comments for prompt correction.