Whenever the people deal with the contracts for the first time, the job offers, property deals, business agreements, as well as the online services, the biggest confusion that comes to the mind is:
- “Is this legally binding or not?”
- “Can I take legal action if the other party backs out?”
This confusion is most common because most of the agreements look valid on the surface but they are not enforceable in law. Understanding how the contract law works in India helps you to protect your money, time, as well as the legal rights.
Why Contract Law Matters in Real Life
The contract law decides when the promise becomes most legally enforceable as well as what are the remedies that are available when that promise gets broken. In India, these particular rules come from Indian Contract Act, 1872. In simple terms, whenever the two parties voluntarily agree on any lawful terms with the intention to create a certain legal obligation, the law usually expects those promises to be honoured. If one of the party defaults, then the other has the right to seek all the legal remedies.
Contracts are not only limited to the big corporate deals. Employment letters, service agreements, rental arrangements, property transactions, consultancy services, and even many online transactions are governed by contract law.
Agreement vs Contract: A Common but Costly Confusion
Many people assume that every agreement is a contract. Legally, that is not true. An agreement becomes a contract only when the law recognises it as enforceable. Social or personal promises usually do not create legal obligations, whereas commercial and professional arrangements usually do.
For example, a promise between friends or family members is generally not enforceable. On the contrary, a signed service agreement, the employment offer letter, or the business contract carries all the legal consequences. The simple way to know this is that every contract is an agreement, but not every agreement is a contract.
How to Know Whether Your Agreement Is Legally Valid
An agreement becomes a valid contract only when certain legal requirements are satisfied. If even one essential element is missing, the agreement may fail in court.
To begin with, the first and foremost requirement is that one of the parties must make a definite offer and the other must accept it without any conditions attached. The contract must be matching perfectly in every respect; if any of the terms is altered, it becomes a new offer, counter-offer. Second, the intention of the parties to create legal relations must be present. This intention is usually the case in business or commercial transactions but is generally absent in domestic or social dealings.
Moreover, there will be the need of lawful consideration that is something of value which is exchanged between the parties. It may be money, services, goods, or even the promise to do or not to do something, but it should not be illegal or contrary to public policy.
Apart from that, there is another very important condition which is the capacity of the parties. They should be legally competent that is to say they have to be of legal age, sound mind and not disqualified by law. Contracts with minors are considered void from the outset, even if the minor stands to gain.
There should be no payment of consent. If consent is obtained through coercion, fraud, misrepresentation, undue influence, or serious mistake, the contract will be voidable at the choice of the harmed party. Additionally, the object of the contract must be lawful. Contracts that include illegal acts, immoral purposes, or actions against public policy are void.
The last requirement is that the contract must be clear regarding its terms and capable of being executed. Unclear or impossible contracts are not enforceable.
Types of Contracts You Commonly Encounter
Some contracts are always valid and enforceable, while others are void or voidable, depending on the circumstances. A void contract has no legal effect, such as an agreement with a minor or one that relates to illegal activities. A voidable contract is one that remains valid until the party affected by non-free consent decides to rescind it.
Contracts may also be executed or executory. Most of the executed contracts are those where the obligations have already been fulfilled, while the executory contracts are yet to get performed. Some contracts are express, meaning their terms are clearly stated in writing or speech. Others are implied, arising from conduct, such as taking a cab and paying the fare.
Certain contracts depend on future uncertain events. These are called the contingent contracts, with the insurance being the most common example.
What Is a Breach of Contract and When Does It Occur?
Breach of contract occurs when one side fails to meet their responsibilities outlined in the contract. Breach of contract may arise in many different circumstances, such as an individual not paying for a service rendered, failing to perform work that was agreed to be done, failing to deliver on a look at another and they had seen that they would not do it.
Then there are situations where one party gives a clear indication that they will breach the contract prior to the contract’s due date. This kind of notice or anticipation before the breach occurs is known as to be the anticipatory breach and it mostly permits the non-breaching party to take immediate course of action through all the legal means.
What Legal Remedies Are Available If a Contract Is Broken?
The law usually offers multiple remedies for a breached contract. The most widely accepted remedy is the reimbursement of the losses incurred. Court gives damages to cover the actual losses that were foreseeable, not as a punishment to the party that is in default.
In cases that warrant such action, the court might order specific performance, meaning that the party in breach will be required to perform the obligations set forth in the contract. This remedy is particularly common in real estate deals and in contracts for uniquely made goods. Courts may also allow temporary restraining orders to prevent a party from doing anything contrary to the contract terms.
In some cases, the court may annul the contract completely and return the parties to their initial state. This remedy is called rescission along with restitution.
Understanding Quasi-Contracts in Simple Terms
The quasi-contracts are not the real contracts created by agreement, but the legal obligations are mostly imposed by law to prevent the injustice. For instance, if someone mistakenly delivers the good to you and then you use them, the law requires you to compensate the very rightful owner. The principle that is behind the quasi-contracts is to prevent the unjust enrichment.
Common Contract Mistakes That Lead to Legal Disputes
- Signing without reading terms
- Trusting oral promises
- Ignoring termination clauses
- Not checking who is legally competent
- Avoiding all the legal advice to save cost
All these mistakes often lead to disputes as well as financial loss.
What You Should Practically Do Before Signing Any Contract
- Read every clause carefully
- Check penalty and exit terms
- Confirm identity and capacity of parties
- Avoid the verbal assurances but not written
- Consult a lawyer for high-value contracts
How We Help You in Contract-Related Matters
Whenever the contracts go wrong, most of the people often feel stuck and are unsure whether the legal action will help or it will make the matters worse. Our legal team primarily assists with drafting as well as reviewing contracts, issuing legal notices for breach, initiating the recovery proceedings, seeking specific performance, as well as resolving the disputes through negotiation or litigation when required.
Our objective is very simple. We protect your money, reduce legal risks, and ensure your rights are enforced effectively.
One can talk to lawyer from Lead India for any kind of legal support. In India, free legal advice online can be obtained at Lead India. Along with receiving free legal advice online, one can also ask questions to the experts online free through Lead India.
FAQs
1. Is the verbal agreement valid in India?
Yes, the verbal agreements are legally valid, but by proving them in court is the most difficult task. The written contracts are always safer.
2. Can the emails or the WhatsApp messages form the contract?
Yes, if at all the intention to create legal relations as well as clear terms can be established.
3. Is the registration mandatory for all of the contracts?
No. The only specific contracts, like the certain property agreements, require mostly the compulsory registration.
4. Can the contract be cancelled after the signing?
Yes, depending on all the terms of the contract as well as circumstances like fraud, coercion, or the breach.
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