The contract: meaning, essentials and kinds
A contract is an agreement enforceable by law. It needs offer and acceptance, serious intention, capacity, free consent, a lawful and possible object, and required formalities.
What a contract is
A contract is an agreement that the law will enforce. Sir Frederick Pollock put it as every agreement and promise enforceable at law. Every contract is an agreement, but not every agreement is a contract: a promise to meet a friend for lunch is an agreement with no legal effect. In Sri Lanka the general law of contract is Roman-Dutch law. English rules apply where a statute brings them in, for example in sale of goods, bills of exchange, agency and partnership, and English cases are often cited as persuasive authority.
Essentials of a valid contract
- Agreement: a definite offer and an unconditional acceptance, so the parties are of one mind (consensus ad idem).
- Intention to create legal relations: in Roman-Dutch law, a serious and deliberate mind (causa); consideration where English law applies.
- Capacity: each party must be legally able to contract.
- Free consent: no misrepresentation, fraud, mistake, duress or undue influence.
- Lawful object: not illegal, immoral or against public policy.
- Possibility of performance: the promise must be possible to carry out when made.
- Certainty: the terms must be clear enough for a court to enforce.
- Formalities where the law requires them: a sale or transfer of land must be in writing and notarially attested.
Kinds of contract by validity
| Kind | Meaning | Example |
|---|---|---|
| Valid | Has all the essentials; binding on both parties | A supermarket agrees to buy 500 kg of carrots from a Nuwara Eliya farmer at an agreed price |
| Void | Has no legal effect at all | A sale of goods that, unknown to both parties, had already been destroyed |
| Voidable | Valid until the innocent party chooses to cancel it | A contract signed because of fraud or threats |
| Unenforceable | Valid, but a court will not enforce it because of a technical bar | A claim brought after the time limit for suing has expired |
| Illegal | Forbidden by law; void, and connected deals may also be tainted | An agreement to bribe a public official |
Other classifications
| Basis | Types | Example |
|---|---|---|
| How it is made | Express (words, oral or written) or implied (conduct) | A signed supply agreement; boarding a bus implies a promise to pay the fare |
| Stage of performance | Executed (fully performed) or executory (still to be performed) | A cash purchase at a till; an order for delivery next month |
| Who is bound | Bilateral (both promise) or unilateral (only one promises) | A sale of a lorry; a public reward offer for a lost dog |
Agreement and contract
A Cargills outlet makes thousands of executed contracts at its tills every day, while its supply deals with farmers are often executory contracts for later delivery. If the company buys land for a new outlet, the deed must be notarially attested, or the transfer has no legal effect.
Short answer: “Define a contract.” A contract is an agreement enforceable by law: an agreement made with the intention of creating legal obligations.
Structured question: “Distinguish between void and voidable contracts.” Void: no legal effect from the start (e.g. subject matter already destroyed). Voidable: valid until the innocent party cancels it (e.g. fraud, duress). Give one example each.
Essay: “Explain the essential elements of a valid contract under the law of Sri Lanka.” Define a contract; explain agreement, intention and causa (consideration where English law applies), capacity, free consent, lawful object, possibility, certainty and formalities; add the kinds of contract; close.
Essentials: A-I-C-F-L-P-C-F: Agreement, Intention (causa), Capacity, Free consent, Lawful object, Possibility, Certainty, Formalities.