Formation of Contract

1 Formation of contract

Contract is an agreement between two or more persons that is enforceable under legal framework.

Contact = agreement + enforceability

Contract creates legal responsibilities or obligations while the agreements which give rise to social responsibilities are not contracts.


A father promises to pay this son 1000 every month as his pocket money. Later he refuses to pay. In this agreement as social obligation is involved and cannot be enforced within legal framework therefore, it was an agreement but not a contract.

2 Classification on the basis of validity

On the basis of validity, contracts can be divided into two categories:

  • Valid contract
  • Void contracts

2.1 Valid contract

A contract which is perfect and correct with its all terms and conditions is called a valid contract.

Essentials of a valid contract are as follows:

  • Agreement which is usually made by offer and acceptance
  • Lawful consideration
  • Intention to create legal relationships
  • Capacity of parties
  • Free and genuine consent
  • Lawful object
  • Certainty and possibility of performance
  • Agreement is not declared void

2.2 Void agreement

A contract which is not complete with all terms and conditions.

Sometimes situation makes it void later on.

A contract to import goods from a foreign country may subsequently become void when war breaks out between two parties.

3 Classification on the basis of Formation

On the basis of formation, contract can be divided in two categories

  1. Express contracts
  2. Implied contracts

3.1 Express contracts

The terms of the contract are expressly agreed upon either by spoken, words or by writing at the time of formation.


A agreed upon to buy car from B at 20,000. Having this contract written or verbally expressed between two parties, it is an express contract.

3.2 Implied contract

It is inferred from the acts or conduct of parties. No written or verbal means are used to express the acceptance of proposal of contract.

There are mostly hidden or the obvious terms.


A person gets into public bus, now it is his implied duty to buy the ticket.