Agreement for CLAT - Practice Questions & MCQ

Introduction

• In the realm of contract law, an "Agreement" serves as the cornerstone upon which valid contracts are built. 
• An agreement represents the meeting of the minds between two or more parties, each intending to create legally binding relations. 

Components of an Agreement:

An agreement consists of two essential components:

Offer:

• Definition: An offer is a clear and explicit statement made by one party (known as the offeror) to another party (the offeree), expressing the willingness to enter into a contract on specific terms.
• Characteristics of a Valid Offer:
  • It must be communicated: The offer must be brought to the notice of the offeree, either directly or through an authorized agent.
  • It should be definite and certain: The terms of the offer must be precise and unambiguous. Vague or unclear offers are generally not considered valid.
  • Intention to create legal relations: The offeror must genuinely intend for the offer to result in a legal contract. Social invitations and casual statements usually do not constitute valid offers.
• Example: A offers to sell his bicycle to B for Rs. 5,000. Here, A is the offeror, B is the offeree, and the offer is clear: to sell the bicycle for Rs. 5,000.

Acceptance:

• Definition: Acceptance is the unequivocal and unconditional agreement by the offeree to the terms of the offer. It indicates the offeree's willingness to be bound by the proposed contract.
• Characteristics of a Valid Acceptance:
  • It must mirror the offer: The acceptance must be in line with the terms of the offer. Any deviation or alteration in the terms may constitute a counteroffer, not an acceptance.
  • Communication of acceptance: Acceptance can be conveyed in various forms—verbally, in writing, or even through conduct—as long as it effectively communicates the offeree's agreement.
  • Acceptance must be given within a reasonable time: There is usually a timeframe within which the acceptance should be communicated, unless the offer specifies otherwise.
• Example: B, in response to A's offer, says, "I accept your offer to buy the bicycle for Rs. 5,000." B's statement signifies a valid acceptance.

Case Law:

• A prominent Indian case that exemplifies the significance of agreement in contract law is Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas & Co. In this case, the court stressed that a valid contract necessitates a clear offer and an unequivocal acceptance. Ambiguity or vagueness in either the offer or acceptance can jeopardize the formation of a legally binding agreement.

Indian Constitution:

• The Indian Constitution indirectly affects contract law by upholding the sanctity of contracts. Article 19(1)(g) of the Indian Constitution grants individuals the right to carry on any trade, occupation, or business. This extends to the right to enter into contracts for commercial purposes, emphasizing the legal importance of agreements in the business realm.

Case Law Example : Mohori Bibee v. Dharmodas Ghose

• Background
  • In this case, Dharmodas Ghose, a minor (a person under the age of 18), mortgaged his property to Mohori Bibee. 
  • Subsequently, he sought to void the contract, arguing that being a minor, he lacked the capacity to enter into a contract, and therefore, the contract was void.
• Key Legal Issue
  • The main issue in this case was whether a contract entered into by a minor was void or voidable under Indian contract law.
• Judgment
  • The Privy Council, which was the highest court of appeal in India at the time, ruled in favor of the minor, Dharmodas Ghose. 
  • They held that the contract was voidable at the option of the minor and that he could avoid the contract and recover his property. 
  • This decision established the principle that contracts with minors are not entirely void but are voidable at the minor's discretion.
• Legal Significance
  • The case of Mohori Bibee v. Dharmodas Ghose is significant for several reasons:
  • Doctrine of Minor's Contracts: It clarified the legal position that contracts with minors are not void ab initio (void from the beginning) but are voidable, meaning they can be affirmed or voided by the minor upon reaching the age of majority.
  • Protection of Minors: The judgment emphasized the need to protect minors from entering into contracts that they may not fully comprehend. It recognized that minors lack the legal capacity to contract on an equal footing with adults and should have the option to void such contracts if they wish to do so.
  • Precedent in Indian Contract Law: This case established a precedent in Indian contract law, and its principles continue to be relevant in cases involving minors' contracts and capacity to contract.