A
contract is an agreement enforceable by law. The law of contract is the basis
of the business. Every business activity is determined and guided by the
agreement of the concerned parties. In fact, the law of contract is concerned
with everybody and every aspect of the business to perform any kind of act. And
it is concerned with the rights and obligation of the parties entering into it.
According
to A.J Salmond: "An agreement creating and defining obligation between two
or more parties is a contract.
Supreme
court of Nepal: "An agreement of two or more parties with the condition is
contract.
In short, the contract includes the following:
-
two or more parties
- an
agreement on the ground of free consent
-
exchange of promise by meeting the minds
-
enforceable by law.
In
short, the right and liabilities that are created reciprocally between the
concerned parties can be called a contract.
Nature of Contract:
A
contract is an agreement which is enforceable by the law. The above definition
has cleared that an agreement between two or more parties concluded with their
consent, creates rights and liabilities between them. Such consent of the
parties creates a contract. An agreement is regarded as a contract where there
are the main characteristics of a valid contract presented in it. There should
be the certain characteristics to be the contract determined by the law.
The
nature of law can be discussed in the following grounds:
1) Agreement/
Promissory Nature:
Contract is private legislation, which is
formed and binding between the concerned parties on the ground of their
agreement. An agreement has two elements one is there should be two parties
making an agreement, one can not enter into a contract alone. Another is.....
meeting
of minds of concerning parties. An agreement is the outcomes of consenting
minds of the parties. The contracting parties must meet their minds as regards
the subject matter of the contract, in the same sense, upon the same thing and
at the same time.
2) Private
legislation:
A
contract is a private legislation binding from those parties who are involved
in it. When anyone breaches the contract the other party becomes victimize
financially. Therefore, the victim party may enforce by the court.
3)
Legal Obligation: There must be a legal obligation in an agreement to become a
contract. Usually, it is presumed that the parties entering into a commercial
agreement intend to create a legal relationship between them. The agreement
which does not establish a legal relationship is not contracts.
Contract = legality + Obligation + Business Matter
4)
Freedom/ Autonomy of parties:
The
parties of the contract must be autonomous to deliver their genuine consent at
the time of concluding contracts. It is also known as the freedom of contracts.
The concerning parties of the contract should be free to choose the form of
contract, its subject, and determine consideration and its extent as well as
the term of condition.
5) Purity
of Contract:
Sanctiteness
is another nature of the contract. The common law system protects contracts
from the commission of fraud, misrepresentation, mistake, coercion and undue
influence and effort to control the economic exploitations of an employee by
the doctrine of restraint of trade.
6)
Function of Contract:
Contract
is a means for the achievement of the purpose of the parties. The following
function are performed by nature through the contract.
- to
facilitate forward planning of transactions and to make provision for future
contingencies.
- to
establish the respective responsibilities of the parties and performance to be
expected from them.
- To
enable the economic risks involved in the transaction to be allocated in
advance between the parties.
- To
provide an alternative way or remedy if things go wrong.
-
Creation of legal rights to protect their own interest.
Reviewed by Bijay Munikar
on
September 24, 2020
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