All contracts are agreements but all agreements are not contracts. Discuss.

There are some cases it is not clearly show what an invitation to treat is and what amounts to an offer. For example, Buses. It is probable that the bus itself is the offer (WILKIE V LONDON TRANSPORT (1947), since if the bus were an invitation to treat, and the passenger’s tender of the fare and offer, then a passenger could board a bus and, not having seen the conductor, get off again without being in breach of contract.

Case 3 (WILKIE V LONDON TRANSPORT (1947)

Essential Elements of a Valid Contract

A contract has been defined in section 2(h) as "an agreement enforceable by law." To be enforceable by law, an agreement must possess the essential elements of a valid contract as contained in sections 10, 29 and 56. According to section 10, all agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with a lawful object, are not expressly declared by the Act to be void, and where necessary, satisfy the requirements of any law as to writing or attention or registration. As the details of these essentials form the subject matter of our subsequent chapters, we propose to discuss them in brief here.

Acceptance

Acceptance is classified one of the essential element of contract that can form a validity of contract. What amount to acceptance? The acceptance may be in writing or oral, or it may be inferred from conduct, for example, dispatching goods in response to an offer to buy according to Singh Avtar (2008).Once an offer has been established the next question to be asked is whether the offer has been accepted. The following definition of acceptance shall be used:” An acceptance is final and unqualified expression of assent to the term of an offer” according to Helen J Bond & Peter kay (1995). There are 2 major problems that arise in relation to acceptance: first, the question of “unqualified expression of assent” and secondly, communication of acceptance”. For unqualified expression of assent, there is one case has relation to this problem. The case is (Hyde v Wrench (1840)

Case 4 (Hyde v Wrench (1840)

, “D, on the 6th June offered in writing to sell his farm for £1000; but P offered £950 which D on 27 June refuses to accept. On 29th June P decided in fact to offer £1000 but D refused to accept this. Held: There was no binding contract.”

The question of communication is a complex topic and needs to be looked at under a number of headings:

General Principle

The general principle is that “An acceptance must be communicated to the offeror”

In (POWELL V LEE (1908), P applied for the post of headmaster of a school. He was called for interview and the managers (D being one) passed a resolution to choose him, whereas they did not make any arrangements for notifying him. However one of the managers, without authority, informed P that he had been appointed. The managers subsequently re-opened the matter and appointed another candidate. It was held that P failed in his action for breach of contract since acceptance had not been properly communicated to him.

Case 5 (POWELL V LEE (1908),

Lawful Consideration

Consideration defines a promise is only legally binding if it is made in return for another promise or an act (either a positive act or something given up), i.e. if it is part of a bargain. The requirement of ‘something for something” is called consideration according to Julie Clarke (2017). It may be define as someone benefit accruing to one party, or some detriment suffered than other. There have been many case law definitions, for example from (CURRIE V MISA ( 1875),

Case 6 (CURRIE V MISA ( 1875),

Some right interest profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given suffered or undertaken by the other. “

Adequacy or sufficiency of consideration also important in consideration aspect. In order to support a promise does consideration have to reflect the economic value of the exchange taking place? I will provide a suitable example: A offers B ten pence for a ring wort RM 1000 and B accepts the offer. The, law in the absence of some form of duress, would uphold this bargain as it is supported by a sufficient rather than adequate consideration.

In (Chappell & Co. Ltd v Nestle Co. Ltd (1960), the chocolate wrappers were said to be a part of consideration as Nestle received benefit from the purchase of an extra chocolate. In Chappell& Co. Ltd v Nestle Co. Ltd, the H Co. manufactured and sold to the N Co., who were manufacturers of milk chocolate, a number of gramophone records of a work which was 'musical' within the meaning of the Copyright Act 1956, and the copyright of which belonged to the appellants. The recording was made on a thin film of cellulose acetate adapted for rising on cardboard discs which were supplied by the N Co. and bore matter advertising their chocolate, the price charged to N Co. being 4d . Per record. The N Co. advertised the records for sale to the public at the price of 1s. 6d. Each, but with a stipulation to the effect that intending purchasers must in respect of each record send, in addition, three wrappers from 6d.Packets of their milk chocolate. The company made a profit on each transaction. The wrappers when received were worthless and were thrown away.

The appellants sought to restrain the two companies from manufacturing and selling the records on the ground that the transactions involved breaches of copyright in that in the conditions they were not protected by the provisions of section 8 of the Copyright Act 1956

Case 7 (Chappell & Co. Ltd v Nestle Co. Ltd (1960)

Intention to create legal relations

Where the parties have not expressly denied an intention to create legal relations, what problems is not what the parties had not in their minds, but the interferences that reasonable people would draw from their action or words, i.e. it is an main purpose test.

(CARLILL V CARBOLIC SMOKE BALL CO (1893), (Paragraph 4 above), the decision in this case might be different if there had been no deposit of money to show certainty.

There is two agreement in intention to crease legal relations context which is commercial agreement and domestic agreements. What is commercial agreement? It is an agreement “subject to contract” Where there is a commercial agreement it is presumed the parties intent to create legal relations. Yet, if the parties expressly deny the intention by starting that negotiations are “subject to contract” or that any agreement is to be “binding in honour only” then there is no contract. I will give a case that relate to the commercial agreement that happened in 1938. In JONES V VERNONS POOL (1938) P claimed that he had sent D a football coupon on which the draw had predicted entitled him to a dividend. D denied having received the coupon. They relied on a clause printed on the coupon which stated the transactions should not be rise to any legal relationship… however… be binding in honour only. It was held that this clause was a bar to an action in court. What is domestic agreement? To explain it in an easier way, domestic agreement is where there is a domestic agreement the presumption is the legal relations are not intended. For example an agreement by a man to pay his wife RM50 per week “housekeeping” money. However it is possible for a man to make a binding contract with her wife, for example as part of a separation agreement. I will give a case which is about an agreement between person who share a household, but which has nothing to do with the management of the household will probably be intended to be legally binding. In (SIMPKINS V PAYS (1955), three ladies who stayed in the same house took part in a fashion competition run by a newspaper. They agreed to send their entries on one coupon and to share any prize money. The court rejected the contention that the agreement to share intended to be legally binding since the contract had nothing to do with the routine management of the household.

Case 8 (CARLILL V CARBOLIC SMOKE BALL CO (1893)

Case 9 (SIMPKINS V PAYS (1955),

Capacity to Contract

In order for an agreement to be in valid and enforceable contract both parties must have capacity to contract? In general all persons have the right to enter into any contract they wish. Different rules apply to minors, corporations, mental patients and drunks. Persons who do not have capacity to the contract in these three aspects which are persons of mental capacity, intoxicated persons and Minors. First and foremost, what is it about minor? A minor is a person who has not yet reached his 18th birthday. When the age of majority was reduced from 21 to 18 in 1969 the practical importance of rules governing minors’ contracts was reduced since most of the decided cases concerned persons aged between 18 and 21. Problems today are most likely to arise with contracts of employment and hire purchase agreements according to Julie Clarke. 2017.

The law governing minor’ contracts show how the law must compromise between two principles. The first, and more important is that the minor must be protected against the own inexperience, The second is that in pursing this object the law should not cause unnecessary hardship to those who deal with minors. The compromise between these principles results in certain contracts with minors being valid, (contracts for necessaries and contracts of service), others are void or voidable, and in some cases the minor may be liable in tort, or in equity. These categories are considered below:

Contract for Necessaries

A minor must only pay f reasonable price for necessaries sold and delivered that stated in (S.3 SALE OF GOODS ACT 1979, 1980).The section also defines necessaries as ‘goods appropriate to the circumstance in life of such minor and to his actual requirement at the moment of sale or delivery’. On the other hand, we should note that the term ‘necessaries’ is not confined to goods but also includes necessary services and, if the minor is married, necessaries for his family. Secondly, the minor is only bound to pay reasonable price, and not the contract prize.

The burden of proving must show that goods are necessaries lies on the seller. There is a case that relate to this statement. In (NASH V INMAN (1908)

Case 10 (NASH V INMAN (1908)

, a tailor sued a minor for the price of clothes, including 11 waist coats. His action failed because he could not show that the minor was not already adequately supplied. A minor is not liable if he has an adequate supply, although if the supplier did not know this.

Contract of Service

This is a contract of apprenticeship or service which is binding on a minor if, looked at as a whole, in the light of the circumstances when it was made, it is for his benefit. He may be bound even if some of the clauses of the contract do not turn out to be to his benefit.

Purchase of non-necessary goods

A minor will not be bound on a trading contract or on a contract for the purchase of non-necessary goods. A minor will however be bound if he ratifies the contract after reaching 18. No one’s consideration is required for the endorsement. In (MERCANTILE UNION GUARANTEE CORPORATION V BALL (1937)

Case 11 MERCANTILE UNION GUARANTEE CORPORATION V BALL (1937)

,a minor purchased on hire purchase a lorry for use in his haulage contract business. It was held that I am a trading contract rather than a contract for necessaries and so the infant was not bound.

Loan and Guarantees

In this circumstance, load to minor are not binding unless ratified by the minor after reaching the age of 18.No one’s consideration is required for ratification.

Liability in tort. A minor cannot be made indirectly liable on a void contract through being sued in tort, but he can be sued in tort if his act is of a kind not contemplated by the contract.

In (IN BURNARD V HAGGIS (1863)

Case 12 (IN BURNARD V HAGGIS (1863)

, a minor hired a horse subject to a condition that he was not to use it for jumping. He broke this provision, and the horse died in a jumping accident, In this case the owner tort action succeeded because the minor had done an act not contemplated the contract, and had taken him out of the scope of the law of contract, and the protection it affords to infants.

Form of contracts

How does contracts to be formed? The general rule is that a contract may be in writing, or oral, or inferred from conduct, or a combination of any these. It is a common mistake to think that a building contract must be in writing makes it easier to prove the contents of the contract, but it is not usually necessary. These are however three categories of exceptions. There are 3 main things cover in form of contract which are contracts which must be deed, contracts which must be in writing and contract which must be evidenced in Writing. For the contracts which must be by deed is about a conveyance or transfer of a legal estate in land (including a mortgage) or the grant of a lease for three or more years must be by deed. A conveyance is the document which transfer the title of unregistered land. A transfer is the documents which transfer title to registered land. For this case, consideration is not compulsory for a deed. Therefore a binding gratuitous promise can be made by deed. There are some elements of a deed are writing, Signature, Witness and Attestation, Delivery, Intention to create a deed.

Free consent

Free consent of all the parties to an agreement is another vital element of contract. This concept can be divided into two aspects which are contract should be made and it should be free of any pressure or misunderstanding according to Chadda P. R. & Bagrial A. K. ( 2007). Consent defines the parties must have agreed upon the same thing in the same sense (sec.13). There is non-of ‘free consent’ if the agreement is induced by Mistake, under influence, fraud misrepresentation or mistake. If the agreement is vitiated by any one of the first four factors, the contract will be voidable and unforced by part guilty of coercion, under influence and so on according to Kapoor N. D. (2004). Consent when two or more persons agree upon something it is said that there is a consensus between them. According to section 13 of the Indian Contract Act this means “that the people agree on the same thing and in the same sense”. It also defines that there is consent on the acceptance of an offer. When there is no consent, there cannot be a contract. I will give you the illustration. Braj has two television. One is SHARP make and other is of Sony make. His friend Ashu offer to buy product Braj thinks he is selling the Sony television This agreement is void because there is no consent since both of them have not understood the same thing in the same way. It can be said that there is no agreement of minds. I will give you another illustration of free consent. “All agreement are contracts if they are made by the consent of the parties.” According to section 14 is when a contract is made without coercion, fraud, undue influence, misrepresentation or mistake. Therefore, if a contract is influenced by any of these elements there cannot be free consent. Salmond has described this as an error in consensus. An agreement, which is made by coercion, fraud, under influence and misrepresentation, is voidable at the option of that party whose consent was not free (Section 19). I will give you a case that occurred mistake in the contract between Centrovincial Estates plc V. Merchant Investor Assurance Ltd (1983)

Mistake.

Mistakes by one party of the expression of his intention, mistake by one party of the expression of his intention and mistake as to the meaning of a trade description, when goods are sold under that trade description are the mistakes which do not affect the validity of the contract. I will provide some cases that show these 3 aspects of mistakes that do on affect the validity of the contract. Centrovincial Estates plc v. Merchant Investor Assurance Ltd (1983) Business premises were to let to tenants who, with the permission of the landlord, sublet part of them. The sublease provided that the rent for the sublease should be increased to the current market value prevailing on December 12, 1982. The tenants wanted to surrender the head lease to the landlords, and it became necessary to assess the current market value of the tenants, wrote a letter to subtenants inviting them to agree to a figure of 65000 Britain pound steering as the appropriate rental value. A few days later the solicitors acting for the landlords and head tenants informed the sub0tenants rent was 126000 British pound steering per anum, and not 65000 British pound steering. The sub-tenants refused to agree to the correction. Held, the landlords and the subtenants were bound by their original offer of a review rent of 65000 British pound steering. The sub tenants were unware that a mistake had occurred and had given valid consideration when undertaking to perform their responsibility based on the agreement according to Prasad U & Indu (2006).

Agreement Expressly Declared as Void.

This is classified as one of the essential element of contract. What is the definition of Agreement Expressly Declared as void? Expressly Declared Void Agreements is the last essential of valid contract as declared by section 10 is that it must not be one which is ‘expressly declared to be void by the act. Therefore, there arises a question, as to what are ‘expressly declared void agreements? There are certain agreements of void ab intio under the contract Act, for example like agreements by incompetent persons [Section 11], agreement with unlawful object or consideration [Section 23], agreement made under mutual mistake of fact [Section 20], agreement without consideration[Section 25], agreement in restraint of marriage, trade or legal proceedings, etc. as they all are contrasting to public policy, agreement to do impossible act (Sec.56), Agreement contingent on impossible events and Agreements the meaning of which is uncertain.

To add more to the above, there are also other agreements which are expressly declared as void. First and foremost, where consideration is unlawful in part: by virtue of Section 24 of the Indian Contract Act,” if any part of a single consideration for one or more objects, or any one of any part of any one of several considerations for a single object is unlawful, the agreement can be said it is void’. It is obviously that this section is a consequence to section 23 of the Act. Where consideration is unlawful, the entire agreement is void as the agreement has to be looked as a whole. Let’s we look into the general principle of law. The general principle of law is where legal part of an agreement can be separated from the illegal part, then the legal part if it can be given effect by rejecting the bad part and obtaining the good part, then the good part is given effect. But where no such separation is possible, the entirely contract is void. Example: ‘A’ has business interest in Indigo, as a manufacturer. He also has interest in illegal traffic of other goods. Where ‘A employs B’ for a salary of 2000 to act as superintendent of A’s entire business, the agreement is void as the object of A’s promise unlawful in part.

Overall Summary

It is a valid and true statement. Before we can critically examine the statement, it is necessary to understand the meaning of agreement and contract. According to section 2(a) "every promise on every set of promises forming the consideration for each other an agreement.

It is fact an agreement is a proposal and its acceptance, by which two or more person or parties promises to do abstain from doing an act. But a contract according to section 2(h) of the Indian Contract Act, "An agreement enforceable by law is a contract. It is clear these definitions that the there elements of a contract ore

(a) Agreement Contractual Obligation

(b) Enforceability by Law.

For Example: X invites his friend to tea and the latter accepts the invitation. This is a social agreement not a contract because it does not imply any legal obligation.

We can say that (a) All contracts are agreements, (b) But all agreements are not contracts. (A) All Contracts are Agreements

For a Contract to be there an agreement is essential; without an agreement, there can be no contract. As the saying goes, "where there is smoke, there is fire; for without fire, there can be no smoke". It could will be said, "where there is contract, there is agreement without an agreement there can be no contract". Just as a fire gives birth to smoke, in the same way, an agreement gives birth to a contract.

Another essential element of a contract is the legal obligation for the parties to the contract, there are many agreements that do not entail any legal obligations. As such, these agreements cannot be called contracts.

For Example:

A gives his car to B for repair and B asks for Rs. 200 for the repair works. A agrees to pay the price and B agrees to repair the car. The agreement imposes an obligation on both. The third element of a contract is that the agreement must be enforceable by Law. If one party fails to keep his promise, the other has the right to go the court and force the defaulter to keep his promises. There are other elements are:

. Offer and acceptance,

2. Legal obligation,

3. Lawful consideration,

4. Valid object,

5. Agreement not being declared void by Law,

6. Free consent,

7. Agreement being written and registered,

8. Capacity to contract has been discussed. It is clear that all contracts are agreements.

Conclusion

Back to the statement all agreement are not contract but all contracts are agreement. An agreement is termed a contract only when it is enforceable by law. All agreements are not necessarily legally enforceable. It can rightly be said that an agreement has a much wider scope than a contract. For example that agreements are not legally binding are an invitation to dinner or to go for a walk and its acceptance. These are agreements not contracts.

An agreement does not necessarily imply a legal obligation on the parties to the agreement. It is import here to clarify what exactly is an obligation. Obligation is a legal tie which imposes upon a person or persons the necessity of doing or abstaining from doing definite act or acts.

An agreement need not necessarily be within the framework of law and be legally enforceable. If it is, then it is a contract. A promises B to do physical harm to C whom, the latter does not like and B promises to pay A Rs. 1000 to do that, it cannot be termed as a contract because such an act would be against the law. Any agreement of which the object or consideration is unlawful is void and cannot be called a contract.

It would be clear from what has been said so far that an agreement has a much wider scope than a contract. An Agreement implies fulfilling some agreed condition. It does not necessarily imply that the stipulated conditions conform to the law and are enforceable by it. It may be said that an agreement is the genus of which contract is the species. It also makes it clear that all agreements are not contracts but all contracts are agreements.

References

K. N. (2004). Business Law. In K. N. (2004), Business Law (pp. 49-68). New Delhi: Sultan chand & Sons Publications.

C. P. (2007). Business & Industrial Laws, Second Edition, Chapter. New Delhi: Pragati Publications.

J. C. (n.d.). Australian Contract Law. Retrieved 1 August, 2017, from Australian Contract Law: https://www.australiancontractlaw.com/about.html

Avtar, S. (2008). Law of Contract. In S. Avtar, Law of Contract. Eastern Book Company, Lucknow.

Indu, P. U. (2006). Systematic Approach to Business & Corporate Laws, Chapter 1. In P. U. (2006), Systematic Approach to Business & Corporate Laws. New Delhi: Bharat Law House Publishers.

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