Contractual relations are common in man’s day today activities. The principles of contract law are almost entirely the creation of English courts and the legislature played a relatively small part in their development. In ancient periods, law of contract was rather treated as a subdivision of the law of property, than as an independent branch of Law.
Law of contract differs from other branches of law as it does not lay down a number of rights and duties which the law will enforce, but, it consists rather of a number of limiting principles, subject to which the parties may create rights and duties for themselves and the same will be upheld by law. In short, it is pertinent to note that in a contract, the laws are created by the parties to the transaction themselves, which will not be against legal prohibitions or public policies.
Law of contract can be defined as, “that branch of law, which determines the circumstances in which a promise shall be legally binding on the persons making it”. The word contract is derived from a Latin word, ‘C o n t r a c t u m’ which means ‘drawn together’. That means the intention to fulfill the contract entered into is common.
The simplest definition for a contract is found in the Indian Contract Act, section 2(h) viz. ‘An agreement enforceable by law’. So an agreement becomes a contract depending upon its legal enforceability. The Act does not say that an agreement shall be in writing. An agreement means every promise or every set of promises forming the consideration for each other. It shall be between two or more parties wherein each of them makes themselves binding upon the conditions set forth in the agreement either orally or written. The promises set froth by each of the parties in the agreement shall form consideration to each other. That means, without consideration, an agreement can only be treated as a ‘domestic agreement’ or a Nudum pactum [Bare promise] which lacks the capability of legal enforceability.
The Act, when enacted, originally consisted eleven chapters, but two chapters dealing with sale of goods and partnership were repealed. The Act is not only a substantive law, but also deals with procedure for entering into contracts. The Act is a self contained one which defines a contract, which elaborately discuss about the essential features of a contract, the conditions in which an agreement cannot be treated as a contract, the mode in which the promises and set of promises contained in the agreement should be performed, the mode of accepting the promise in an agreement as well as the communications of proposal and acceptance are made etc.
The Act also defines different types of contract which can be enforced even though it lacks the essential features of a contract as per section 10 viz. quasi contracts as well as the different types of contracts which shall not be entered into viz. contracts against public policies, restraining trade, restraining marriage etc.
The Act also vastly discusses about three special branches of contracts viz. law of agency, law of indemnity and guarantee and law of bailment along with the rights, duties etc of the parties to such contracts.
Considering the above facts envisaged in the Act, it cannot be described as a self contained statute because the procedure relating to the enforceability of the same is dealt with by various other enactments, especially the Specific Relief Act.