Generally contract may be defined as an agreement which creates rights and obligations between the parties. These obligations and right s must be of such a nature that these can be claimed in the court of law.
According to Salmond, “A contract is an agreement creating and defining obligation between the parties.” Section 8(h) of the Indian Contract Act defines contract as an agreement which is enforceable by law.
From the above definitions of contract it is clear that a contract essentially consists of three elements:
- An agreement
- Obligation, and
- Enforceability
An agreement involves a valid offer by one party a valid acceptance by the other party. Enforceability means contract must be legal in nature and which can be claimed in the court of law.
For example, X invites Y to a party and Y accepts the invitation, then it is only a social agreement and not a contract. On the other hand A agrees to sell his house to B for Rs. 5, 00,000. This is a contract.
