An Analysis On Merits And Demerits Of Contract Law

     An Analysis On Merits And Demerits Of Contract Law

Author: Abhay Singh, University of Lucknow.


Signing of contract means that all the parties have agreed to terms and conditions of the contract, their consent is  free,  hence they accept the legal obligation of the contract. The purpose of contract law is to draft comprehensive terms of agreement, parties obligation, etc. According to legal scholar Sir John William Salmond, a contract is “ an agreement creating and defining the obligations between two or more parties” For the formation of a contract the process of proposal or offer by one party and the acceptance thereof by the other is necessary. This generally involves the process of negotiation where the parties apply their minds make offer and acceptance and create a contract.

What is Contract?

Contract is an agreement enforceable by law between two or more parties. Our daily life involves various contracts like buying property, employee- employer relationship, applying for loan, agreeing to various terms and conditions while buying products offline and online, etc. When one party fails to perform its obligation it gives rise to legal disputes. When one party breaches its contract, the other party can sue for damages or go to court for the enforcement of contract.

Contract Law:

When a offer is made with the intention of creating legal obligation it becomes contract. To become a contract, an agreement must be accompanied by legal obligation. In case of Balfour vs Balfour, Mr. Balfour agreed to pay his life a monthly sum. When he failed to pay, she sued him. But she failed as there was no intention to create a legal obligation so, here Mr Balfour cannot be made liable to pay.

When agreement is a contract?

An agreement is a contract when:

  • There is free consent of parties to enter into an agreement. There should be no coercion, fraud, mistake, undue influence, misrepresentation, in order to form a contract.
  • The parties should be competent to enter into contact. Section 11 and 12 of Indian Contract Act lays down the competency of parties.
  • There should be lawful consideration and lawful object. This means that it must not be  forbidden by law or defeats provision of law.

Types of Contract:

There are various types of contract:

  • Express Contracts: In these contracts, terms and conditions are expressly cleared either orally or in written.
  • Implied Contracts: The contracts which are assumed owing to facts are known as implied contracts.
  • Void and Voidable Contracts: The contracts which are illegal from the beginning and are unenforceable are known as void contracts. Voidable contracts are those in which one party is bound to perform the contract while other is at the option either to perform or terminate it.
  • Adhesion Contracts : In these types on contracts, the stronger party has the bargaining power and leave the other party, with a choice either to accept or reject it.
  • Bilateral and Unilateral Contracts: Bilateral contract involve two parties while in a unilateral contracts, promise is made by a single party.

Advantages of Contract Law:

  1. One of the biggest advantage of contract law is that it provides clarity. It serves as a guide to the relationship between the parties as it gives a clear understanding of terms and conditions of the agreement.
  2. It alleviates the risks of business disagreements, making the relationship of parties more reliable by backing up with the legal obligation. This obligation acts as a safeguard for the parties for protecting their respective interests.
  3. It makes it much easier for the parties when in written form, to revisit the agreement anytime for clarity thus leaving a very little room for misinterpretation or confusion.
  4. Contract leads to better management of relationship, like in employee-employer, principle-agent, etc.  For a much needed management and clarity, contract law is a necessity.
  5. Documentation allow comprehensive representation of terms and conditions of the agreement.
  6. It provides more flexibility, more opportunities, and also increased level of earnings.

Disadvantages of Contract Law:

  1. They include cost and time. Sometimes, cost can be too high. In some cases, lawyer are engaged to draft a comprehensive contract, so overall cost becomes high and involves great deal of analysis.
  2. Contracts are in written, the language used may act as a barriers between the parties. Usage of plain language is advised to omit any ambiguity, but the legal and technical words often cause discomfort to parties.
  3. The terms and conditions of the contract are predecided, hence contracts could not sustain the changing need and development and ultimately lead to breach of contract.
  4. It may lead to default or foreclosure risks.

Minimizing Liability

Too many and too lengthy contract could to lead to suspicion in the minds of parties. A contract should be thorough, covering all the details of agreement. A limited liability clause could be helpful.  Implied contracts are crucial and give way to misinterpretation, hence should be avoided.



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