1.

All contract are agreements, but all agreements are not

contract-Discuss:
A contract is an agreement between parties that is legally enforceable. A simple
"agreement" is an arrangement between the parties which may or may not contain the
necessary elements to be enforceable before a court of law.
In Simple Words:
A Contract is enforceable by law while an Agreement is not enforceable by law.
A valid contract must contain the ten valid elements which are:

· Offer and Acceptance

· Intention to Create Legal Relations

· Lawful Consideration

. Capacity of Parties

· Free Consent

. Lawful Object

· Writing and Registration

· Certainty

· Possibility of Performance

. Not Expressly Declared Void

Agreement is emerged from willingness of both parties to do or not to do something. As

no legal obligation is required here so just any two parties can mutually dispute on any
matter. Agreement is emerged this way.

But all true contracts begin with an agreement.

An agreement may be legal or illegal. As it is not bound by the law it needs not to follow
the rules.
On the other hand only legally enforceable agreement is contract. So it can never be
illegal.

Agreement may be against of human rights. It will create no problem because the parties
will not seek help from the law.

A contract can never be against of human rights.

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Purpose of an agreement can be illegal.
But purpose of a contract can never be illegal.

An agreement can be with an impossible matter. As it is not banded by the law people
can make agreement on any matter.
Contract cannot be with any impossible matter.

Agreement between two parties does not create any legal obligation or relationship.

As contract is enforceable by law its obvious purpose is to create a lawful relationship.

An agreement may be expressed or implied.

But a contract must be expressed and clear that no ambiguity can occur.

An agreement is not dependent on contract.

But a contract is dependent on any agreement.

There is no obligation to write or register an agreement.

Each and every contract must be written and registered.

Any two parties can make an agreement.

But the parties of contract must be capable of contracting.

Thus, All agreements are not contract and All contracts are agreement.
2. Not all persons have the capacity to enter into a contract-Discuss the
statement

The legal ability of people or organizations to enter into a valid contract. A person
entering into a contract will have full, limited, or no capacity to contract.

Full capacity to contract:

The unlimited ability of a person to enter into a contract that is legally binding. Most
adults, including those who are illiterate, have full capacity to contract and are said to be
competent parties.

Limited capacity to contract:

The ability of a person to enter into a contract that is legally binding upon himself or
herself only under certain circumstances. For example, minors have limited ability to
contract, which means that the contract of a minor is valid only if the minor does not
disaffirm a contract entered into during his or her minority or shortly after reaching
majority. Contracts made by minors to obtain such necessities as food, clothing, and
shelter, however, are not voidable by the minor and will be enforced against him or her.

No capacity to contract:
The inability of a person to enter into a valid contract under any circumstances. Such
inability can arise when a person has been adjudicated insane or if he or she is an

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officer of a corporation who is not authorized to execute a contract on behalf of the
corporation. Lack of capacity would also cover acts of a corporation beyond the powers
as defined in the articles of incorporation.

When the law limits or bars a person from engaging in specified activities, any
agreements or contracts to do so are either voidable or void for incapacity. Sometimes
such legal incapacity is referred to as incompetence.

Natural persons

Standardized classes of person have had their freedom restricted. These limitations are
justified exceptions to the general policy of freedom of contract and the detailed human
and civil rights that a person of ordinary capacity might enjoy.

 Infancy

The definition of an infant or minor varies, each state reflecting local culture and
prejudices in defining the age of majority, marriageable age, voting age, etc. In
many jurisdictions, legal contracts, in which (at least) one of the contracting
parties is a minor, are voidable by the minor. For a minor to undergo medical
procedure, consent is determined by the minor's parent(s) or legal guardian(s).

In contracts between an adult and an infant, adults are bound but infants may
escape contracts at their option (i.e. the contract is voidable). Infants may ratify a
contract on reaching age of majority. In the case of executed contracts, when the
infant has obtained some benefit under the contract, he/she cannot avoid
obligations unless what was obtained was of no value. Upon repudiation of a
contract, either party can apply to the court. The court may order restitution,
damages, or discharge the contract. All contracts involving the transfer of real
estate are considered valid until ruled otherwise.

 Minors and Contractual Capacity

A minor (typically under 18) can disaffirm a contract made, no matter the case.
However, the entire contract must be disaffirmed. The minor cannot keep any of
the goods traded for. Also, barter transactions such as purchasing a retail item in
exchange for a cash payment is generally recognized through a legal fiction to
not be a contract due to the absence of promises of future action.

 Insanity, mental illness, or mental/medical condition

Individuals may have an inherent physical condition which prevents them from
achieving the normal levels of performance expected from persons of
comparable age, or their inability to match current levels of performance may be
caused by contracting an illness. Whatever the cause, if the resulting condition is
such that individuals cannot care for themselves, or may act in ways that are
against their interests, those persons are vulnerable through dependency and
deserve the protection of the state against the risks of abuse or exploitation.
Hence, any agreements that were made are voidable, and a court may declare
that person a ward of the state and grant power of attorney to an appointed legal

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 guardian (in England and Wales, this is a specific function of the Court of
Protection).

 Drunkenness/drug abuse

Although individuals may have consumed a sufficient quantity of intoxicant or

drug to reduce or eliminate their ability to understand exactly what they are
doing, such conditions are self-induced and so the law does not generally allow
any defense or excuse to be raised to any actions taken while incapacitated. The
most generous states do permit individuals to repudiate agreements as soon as
sober, but the conditions to exercising this right are strict.

 Bankruptcy

If individuals find themselves in a situation where they can no longer pay their
debts, they lose their status as creditworthy and become bankrupt.

 Enemy aliens and/or terrorists

During times of war or civil strife, a state will limit the ability of its citizens to offer
help or assistance in any form to those who are acting against the interests of the
state. Hence, all commercial and other contracts with the "enemy", including
terrorists, would be considered void or suspended until a cessation of hostilities
is agreed.

3.Discuss how a contract can be discharged by breach

Failure of a party (not having a legal excuse) to perform in accordance with a

promise made is Breach of contract. Discharge of a valid contract involves the process
under which the primary (performance) obligations come to an end. Discharge by breach
will generally give rise to secondary obligations to pay damages.

The effect of a breach of contract (at least where the breach consists of
nonperformance or defective performance by the agreed time of performance) depends
upon the classification of the term which has been breached as either a condition,
warranty or in nominate. The right to repudiate and treat the primary obligations as
discharged arise in the case of the conditions but not warranties, and may arise the case
of in nominate terms depending upon the seriousness of the breach.
In certain circumstances one party may indicate an intention not to perform his
obligations in advance of the time for performance. This has become known as “
anticipatory breach” although it is more accurately described as “ breach by anticipatory
repudiation”.

In this situation, the non-breaching party may elect either

a) to affirm the contract, await the performance and then sue for breach, or b) treat the
contract as immediately repudiated and himself as being discharged from his
obligations:

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Breach of contract is where a party thereto breaks through the obligation which it
imposes.

The effect of a breach of contract is that -

(a) It always gives the party injured a right of action.

(b) It often, but not always, discharges the contract. This depends upon circumstances to
be presently discussed.

If one of the parties to a contract breaks through the obligation which it imposes,
a new obligation arises in every case - a right of action conferred upon the party injured
by the breach. Besides this, there are circumstances under which the breach will
discharge the injured party from such performance as may still be due from him. Every
breach of contract confers the right of action upon the injured party, but every breach
does not necessarily discharge him from doing what he has undertaken to do under the
contract. The contract may be broken wholly or in part, and, if in part, the breach may or
may not be sufficiently important to operate as a discharge; or, if it is of such importance,
the injured party may choose not to regard it as a discharge, preferring to continue to
carry out the contract, reserving to himself the right to sue for such damages as he may
have sustained by the breach. It is often very difficult to determine whether or not a
breach of one of the terms of a contract discharges the party injured.

4. Discuss the essentials of contract of guarantee

A contract of guarantee is a promise to answer for the debt, default or miscarriage of

another. It is a collateral engagement by which a parson undertakes to be liable for the
debt of another's default.

Section 126 of Contract Act "A contract of guarantee is a contract to perform the promise
or discharge the liability of a third person in case of his default".

A person who gives the guarantee is called the Surety or Guarantor and the person in
respect to whose default the guarantee is given is called the Creditor. The person to
whom the guarantee is given is called the Creditor.

A guarantee may be either oral or written. Though consideration is essential for a

contract of guarantee, it is not necessary, that benefit should accrue to the surety. It is
sufficient if there is some benefit to the principal debtor.

Section 127 of the Act clearly states, anything done, or any promise made, for the
benefit of the principal debtor, may be sufficient consideration to the surety for giving the
guarantee.

Example: A and B visit a shop. C is the owner of the shop. B says to C that let A have
the goods on credit he does not pay I will. This is a contract of guarantee. Here B is the
surety, C is the creditor and A is the principal debtor.

Essentials of this Contract:

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 1. In a contract of guarantee there should be a consent and concurrence of the
three parties namely the principal debtor, the creditor, and the surety.
2. In this contract there must be a clear and distinct promise by the surety to answer
for the debt, default or miscarriage of the principal debtor. A vague or ambiguous
promise is no guarantee.
3. The liability of the principal debtor must be one which is legally enforceable. i.e. it
should not be time-barred, illegal etc. Where the liability is unenforceable, it does
not exist. And where the liability does not exist, there cannot be a contract of
guarantee.

Continuing Guarantee:

A guarantee which extends to a series of transactions is called a "continuing guarantee".

In case of this kind of guarantee which extends, over two or more transactions, the
liability the surety extends over the successive transactions which come within its scope.

Revocation of continuing Guarantee: Continuing guarantee can be revoked in the

following ways.

1. Notice: A continuing guarantee may at any time be revoked by the surety as to

future transactions, by notice to the creditor.
2. Death of the Surety: The estate of the surety is liable for all transactions entered
into prior to the death of the surety unless there is a contract to the contrary. It is
not necessary that the creditor should have notice of the death.

Invalid Guarantees: A guarantee is invalid in case of an assent obtained by

misrepresentation, of if some material fact is concealed. Where person gives a
guarantee on the condition that the creditor shall act upon it until another person has
joined in it as a co-surety, the guarantee is invalid if the other person does not join.

5.How can negotiable instruments be endorsed? Discuss in details

A negotiable instrument is a specialized type of "contract" for the payment of

money that is unconditional and capable of transfer by negotiation. As payment of
money is promised later, the instrument itself can be used by the holder in due course
frequently as money. Common examples include cheques , banknotes (paper money),
and commercial paper

A negotiable instrument can be endorsed on the following ways:

1. Blank or general endorsement: If the endorser signs his name only and does
not specify the name of the endorsee, the endorsement is said to be in bland.
The effect of a blank endorsement is to convert the order instrument into
bearer instrument which may be transferred merely by delivery.

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 2. Endorsement in full or special endorsement: If the endorser, in addition to his
signature, also adds a direction to pay the amount mentioned in the
instrument to , or to the order of, a specified person, the endorsement is said
to be in full.
3. Partial endorsement: Section 56 provides that a negotiable instrument cannot
be endorsed for a part of the amount appearing to be due on the instrument.
In other words, a partial endorsement which transfers the right to receive only
a part payment of the amount due on the instrument is invalid.
4. Restrictive endorsement: An endorsement which, by express words, prohibits
the endorsee from further negotiating the instrument or restricts the endorsee
to deal with the instrument as directed by the endorser is called ‘restrictive’
endorsement. The endorsee under a restrictive endorsement gets all the
rights of an endorser except the right of further negotiation.
5. Conditional endorsement: if the endorser of a negotiable instrument, by
express words in the endorsement, makes his liability, dependent on the
happening of specified event. Although such event may never happen, such
endorsement is called a ‘ conditional’ endorsement.

In the case of a conditional endorsement the liability of the endorser would arise
only upon the happening of the event specified. But the endorsee can sue other
prior parties, e.g., the maker, acceptor etc., if the instrument is not duly met at
maturity, even though the specified event did not happen.

6.Why do you think an agreement to take a person to moon for a holiday

cannot be a contract?

A contract is an agreement between parties that is legally enforceable.

A Contract is enforceable by law while an Agreement is not enforceable by law. In this

case of taking a person to moon it cannot be enforced by law.
Its just a mutual agreement.

A valid contract must contain the ten valid elements which is not possible in terms of
taking a person to moon:

· Offer and Acceptance

· Intention to Create Legal Relations

· Lawful Consideration

. Capacity of Parties

· Free Consent

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. Lawful Object

· Writing and Registration

· Certainty

· Possibility of Performance

. Not Expressly Declared Void

Moreover the company which agrees to take the person to moon, cannot make it in a
contract that they will take him on what specific date or method or which space vehicle.

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