Contractual Agreement

Leezer Kaur
Apr 18, 2023
3 min read

“Written by Leezer Kaur, a 3rd-year B.A.LL.B. student at Army Institute of Law, Mohali.”

Introduction

‘Agreement’ is defined under Section 2(e) of the Indian Contract Act, 1872, as a promise for some valid consideration. An 'agreement' is considered a contract only when it is enforceable in a court of law. Therefore, it can be said that all contracts are initially an agreement. A contractual agreement is an agreement that is legally binding and enforceable in a court of law. The Indian Contract Act, of 1872 mainly deals with these types of agreements. The term 'contractual agreement' is simply referred to as a contract that is defined under Section 2(h) as an agreement enforceable by law.

Essentials

To be an enforceable contractual agreement, it is important to meet the following conditions:

There must be offered by one party and acceptance of that offer by the other party.
There must be mutual consent, and no coercion, fraud, or misrepresentation must be involved in taking of consent of the parties.
There must be valid consideration involved, and the contract must be for a legal purpose.
The parties to the contract must be competent to contract. They have to be major, of sound mind, etc.
It may be oral or written, but written form is preferred as it involves lesser chances of disputes concerning the terms and conditions.

Types

There are different types of contractual agreements:

Express contract: It is mainly in written form, where the terms of contracts are expressly stated.
Implied contract: It has to be inferred from the conduct of the parties to the contract and is not in a written form.
Unilateral contract: where only one party agrees to act or provide something to the other party.
Bilateral contract: when both parties are supposed to exchange items or services as per the terms and conditions of the contract.
Contingent contract: the enforcement or validity of this type of contract depends upon the fulfilment of an uncertain condition.
Void contracts: These are those contracts that are no longer enforceable in a court of law and become invalid.
Voidable contract: these could be made void or enforceable at the discretion of the other party to the contract.
Quasi-contract: these are pseudo-contracts or implied contracts. In these, parties to the contract don’t have prior knowledge of any contract between them and may require enforcement by the court.
Digital contract: It is a type of contract whereby the entire contract takes place on the online platform from entering into to execution of the contract. It does not involve the physical meeting of the parties to the dispute.

Uses

A Contractual agreement is mainly used in partnership, employment, indemnity, lease-related and non-disclosure agreements where there is a need to make it enforceable to prevent the breach of the agreement by the parties to the agreement and to sue them for breach if required.

Particulars to be provided

It may provide for:

Rights and obligations of both parties to the contract.
Schedule of the payments.
Conditions concerning the performance of the contract, like date and time.
It may also provide for consequences or compensation to be paid in case of a breach of the agreement.

Breach of Contractual Agreement

In case of breach of a contract, the aggrieved party can sue the other party for breach and can claim damages or compensation. In some cases, the court may ask the other party to perform its part of the contract and fulfil the contract. Also, the liability of the other party may be discharged in the case of:

Impossibility of performance
Lapse of time
Operation of law
Agreement or consent of the other party.

Conclusion

A contractual agreement is also referred to as a contract that is defined under Section 2(h) of the Indian Contract Act, 1872, as an agreement enforceable by law. It can be said that all contracts are initially an agreement. It must be valid and legal. It must involve an offer by one party and acceptance by the other. Both parties must be competent to contract. These agreements provide for terms and conditions concerning performance, payment schedules, and consequences in case of breach of the contract. In case of breach of contract, the other party could be sued for compensation or damage or could even be asked to perform its part of the performance by the contract.

References

'Contractual agreement', Contracts Counsel, available at: https://www.contractscounsel.com/t/us/contractual-agreement.