Chapter 3: Validity of Contracts & Agreements-Theory

Question 1

List down essential elements of a valid contract.

Answer 1

1. Offer and acceptance.
2. Intention to create legal relationship.
3. Capacity/Competence of parties.
4. Free consent.
5. Consideration.
6. Lawful object.
7. Possibility of performance.
8. Certainty.
9. Legal formalities regarding writing and registration.

Question 2

In a valid contract there must be offer and acceptance. Elaborate. (2 Points)

Answer 2

In a valid contract, there must be two parties to an agreement, one making offer and other making acceptance.
Offer can be accepted only by that person to whom offer is made.

Question 3

In a valid contract, there must be intention to create legal relationship. Elaborate.

Answer 3

In a valid contract, parties should have intention to create legal relationship between them. I.e. In the case of default they intend to sue each other.

Question 4

In a valid contract, There must be capacity/competence of parties. And which persons are incompetent to contract? Elaborate.

Answer 4

In a valid contract, parties to the contract must be competent to contract. Following persons are incompetent to contract:
1. Minor.
2. Person of unsound mind.
3. Persons disqualified by law.

Question 5

In a valid contract, there must be free consent. Elaborate, Also, 1.Define free consent. 2.What happens if consent is not free?

Answer 5

In a valid contract, there must be free consent.
1. Free consent means there should be no Coercion, Undue influence, Fraud, Misinterpretation, or Mistake.
2. If consent of a party is not free, contract becomes voidable at the option of party whose consent is not free.

Question 6

Define consideration. In a valid contract, there must be consideration. Elaborate.(3 Points)

Answer 6

Consideration means benefits moving from one party to another, or simply “something in return”.
In a valid contract, there must be a consideration, which should also be lawful.
Generally, an agreement without consideration is void.

Question 7

In a valid contract, there must be lawful object. Elaborate.

Answer 7

In a valid contract, object of an agreement must be lawful.
If object is unlawful, it cannot be enforced by law.

Question 8

In a valid contract, there must be possibility of performance. Elaborate. (1 line)

Answer 8

Agreement to do an impossible act is void.

Question 9

In a valid contract, there must be certainty. Elaborate.

Answer 9

In a valid contract,, meaning, terms and conditions of an agreement must be certain or capable of being certain.

Question 10

In a valid contract, there must legal formalities regarding writing and registration. Elaborate.

Answer 10

A contract can be done in writing as well as oral. However, in certain cases, agreements are required to be in writing and registered,
For example:
1. Agreement to make a gift for natural love and affection must be in writing and registered.
2. Promise to pay time-barred debt must be in writing.
3. Arbitration agreements must be in writing.

Question 11

Enlist different types/classification of contracts.

Answer 11

1. Valid contract.
2. Void contract.
3. Voidable contract.

Question 12

What is valid contract?

Answer 12

It means an agreement enforceable by law.

Question 13

What is void contract?

Answer 13

It means a contract which ceases to be enforceable by law.

Question 14

What is voidable contract?

Answer 14

Voidable contract is a contract, which is enforceable at the option of one party. (i.e. aggrieved party). The contract is voidable at the option of aggrieved party and not at the option of defaulting party.
For example:
1. Agreement in which consent is not free.
2. Agreement in which goods or services are not delivered on specific time.
3. Agreement in which goods or services are not accepted by buyer.

Question 15

Definition of consideration? (Long one, 2 Points)

Answer 15

When at the desire of the promisee, the promisor (or his agent on his behalf) has done or does or promises to do something, such act is called a consideration for the promise.
Consideration may be either a positive act (i.e. to do) or abstinence (i.e. not to do).

Question 16

List down essential elements of consideration. (7 Points)

Answer 16

1. Consideration must be given at the desire of promisee.
2. Consideration may be given by promisor or any other person.
3. Consideration may be past, present or future act or abstinence.
4. Consideration must be something in value.
5. Consideration must be real.
6. Consideration must be something which promisor is not already bound to do.
7. Consideration must be lawful.

Question 17

Consideration must be given at the desire of promisee, elaborate.

Answer 17

Consideration must be given at the desire of promisee, acts done without the desire of the promisee, or done voluntarily cannot become a valid consideration.

Question 18

Consideration may be given by promisor or any other person. Elaborate.(1 Single line)

Answer 18

Consideration may be provided by promiser himself or by any other person on his behalf.

Question 19

Consideration may be past, present or future act or abstinence, Elaborate. (3 points)

Answer 19

1. Past consideration (i.e. something has been done before agreement, for example past voluntary services.)
2. Present consideration (i.e. consideration moves simultaneously with the promise).
3. Future consideration (i.e. consideration will move at a future date after agreement).

Question 20

Consideration must be something in value. Elaborate. (2 points)

Answer 20

Consideration must be some valuable thing, although it is not required to be of equal value of something given.
Inadequate consideration is a valid consideration.

Question 21

Consideration must be real. Elaborate. (3 points)

Answer 21

Consideration must be real.
It should not be:
1. Physically impossible (e.g. To make a dead man alive, to run at speed of 100 km/h).
2. Uncertain or illusory (e.g. to make someone happy).

Question 22

Consideration must be something which promisor is not already bound to do. Elaborate. (2 points)

Answer 22

A promise to do what someone is already bound to do is not a valid consideration for a new promise.
Similarly, a promise to perform a public duty by a public servant is not a consideration.

Question 23

Consideration must be lawful. Elaborate.

Answer 23

If consideration or object is unlawful, agreement will be void.

Question 24

List down all exceptions to the rule,” no consideration, no contract”/Situations in which agreements without consideration are valid. (6 points)

Answer 24

1. Agreement made on account of natural love and affection.
2. Agreement to compensate for past voluntary service.
3. Agreement to pay time-barred debt.
4. Completed gift.
5. Contribution to charity.
6. Other contracts.

Question 25

Agreement made on account of natural love and affection is valid without consideration. Elaborate. (4 points)

Answer 25

Such an agreement is valid even without consideration if it is:
1. Between parties having a near relation to each other &
2. Made on account of natural love and affection &
3. Expressed in writing &
4. Registered under the Law for registration of documents.

Question 26

Agreement to compensate for past voluntary service Is valid without consideration. Elaborate.

Answer 26

A promise to compensate a person who has already done something voluntarily for the promisor Is valid even without consideration.

Question 27

Agreement to pay time-barred debt is valid without consideration. Elaborate. (3 points)

Answer 27

An agreement to pay a time-barred debt is enforceable provided:
1. Debt cannot be recovered because of law of limitation.
2. It is made in writing &
3. Signed by debtor or his authorized agent.

Question 28

Completed gift is valid agreement without consideration. Elaborate.
(Definition of gift + legal implication)

Answer 28

Gifts are property given by one person (called donor) to another person (called donee) without consideration.
Any gift is valid without consideration if it is completed (i.e. transferred), written and registered.

Question 29

Contribution to charity is valid contract even without consideration. Elaborate.

Answer 29

A promise to contribute to charity would be enforceable if, on the faith of the promise, promisee takes step and undertakes a liability.

Question 30

Some other agreements without consideration are valid, Enlist all. (4 Points)

Answer 30

Consideration is not necessary in:
1. Contract of bailment.
2. Contract of guarantee.
3. Contract of agency.
4. Complete waiver of a right.

Question 31

An object/consideration is unlawful if:
Write down all 5 points.

Answer 31

An object/consideration is unlawful if:
1. It is forbidden by Pakistan Penal Code i.e. punishable by law (e.g. wagering).
2. It involves injury to a person or his property.
3. It is fraudulent.
4. If permitted, it would defeat the provisions of any law.
5. Court regards it immoral or opposed to public policy.

Question 32

Enlist all agreements opposed to public policy. (7 Points)

Answer 32

1. Trading with an alien enemy.
2. Stifling criminal prosecution.
3. Sale of public office.
4. Marriage brokerage agreement.
5. Restraint of parental rights.
6. Restraint of personal liberty.
7. Agreement to create monopoly.

Question 33

Under agreements opposed to public policy, define trading with an alien enemy.

Answer 33

Contracts entered before the declaration of war are either suspended or terminated during the period of war.

Question 34

Under agreements opposed to public policy, define stifling criminal prosecution.

Answer 34

If a person has committed a crime, he must be punished.
Hence, any agreement which seeks to prevent the prosecution of guilty is void.

Question 35

Under agreements opposed to public policy, define sale of public office. (2 Points)

Answer 35

Agreement for sale of public office are illegal because they will lead to corruption.
Similarly, agreement to pay to a public servant to act corruptly or to retire is void.

Question 36

Under agreements opposed to public policy, define marriage brokerage agreement.

Answer 36

Agreement to procure marriage for reward is void.

Question 37

Under agreements opposed to public policy, define restraint of parental rights.

Answer 37

An agreement which prevents a parent to exercise his right of guardianship is void.

Question 38

Under agreements opposed to public policy, define restraint of personal liberty.

Answer 38

An agreement which unduly restricts the personal liberty of a person is void.

Question 39

Under agreements opposed to public policy, define agreement to create monopoly.

Answer 39

Agreement to create monopoly is void.

Question 40

What is the status of object or consideration Partly lawful and partly unlawful?

Answer 40

If some part of an agreement is legal and other part is illegal, status of such agreement is as follows:
1. If the illegal part can be separated. Then legal part will be enforced and illegal part will be rejected.
2. If the illegal part cannot be separated, then whole agreement is void.

Question 41

List down persons which are incompetent to contract.

Answer 41

1. Minor.
2. Person of unsound mind.
3. Person disqualified by law.

Question 42

Who is a minor?

Answer 42

A minor is a person who has not attained age of majority which is 18 years of age. However, if a Guardian is appointed by court for a minor, then age of majority will be 21 years.

Question 43

Agreement by a minor is void against him. Elaborate.

Answer 43

An agreement with the minor is void against him, but minor can enforce it for his benefits.

Question 44

Rule of Estoppels does not apply to a minor. Elaborate.

Answer 44

If a minor falsely represents himself as of age of majority, he will still not be liable and can avoid contract.

Question 45

No ratification of agreement by minor. Elaborate.

Answer 45

An agreement made by minor cannot be ratified subsequently by him after he attains age of majority.

Question 46

Minor in a partnership. Elaborate.

Answer 46

A minor cannot be a partner in a partnership firm. However, he can be admitted to the benefits of partnership with the consent of all partners.

Question 47

Minor in an agency. Elaborate. (3 Points)

Answer 47

A minor can be an agent and can bind principal with his acts.
However:
1. A minor cannot be personally liable for negligence or breach of duty.
2. A minor cannot be a principal. (If so, agreement will be void and agent will be personally responsible.

Question 48

Agreement by guardian or parents on behalf of minor. Elaborate.

Answer 48

If guardian or parents enter into a contract on behalf of minor for the benefit of minor, such agreement can be enforced by or against minor.

Question 49

Contracts by minor and adult jointly. Elaborate.

Answer 49

If a minor and an adult jointly enters into a contract with another person, minor has no liability under the contract and contract can be enforced only against adult.

Question 50

Minor and insolvency. Elaborate.

Answer 50

A minor cannot be declared as insolvent because he is incapable of contracting debts.

Question 51

Minor and Filing suit. Elaborate.

Answer 51

A minor can sue but cannot be sued in civil court.

Question 52

Necessities supplied to minor. Elaborate.

Answer 52

If a person supplies necessities of life (e.g. paying expenses for living, medicine, studies) to a minor or to his dependents, he can recover the reasonable price from the property of such minor.

Question 53

Who is a person of unsound mind?

Answer 53

A person is of unsound mind if at time of making a contract:
1. He is not able to understand it &
2. He’s not able to judge its effects on his interest.
Examples of persons of unsound mind include:
Specific persons/Idiot (i.e. mentally deficient by birth),
Lunatic (i.e. mentally deficient in intervals),
Drunken person, or a person delirious from fever.

Question 54

What is the position of agreement with specific person?

Answer 54

Specific person is a person who is of unsound mind by birth. Agreements with such a person is always void.

Question 55

What is position of agreement with lunatic?

Answer 55

Lunatic is a person who is normally of unsound mind, but occasionally of sound mind.
1. If lunatic is of unsound mind at time of contract, it will be void.
2. If lunatic is of sound mind at time of contract, it will be valid. However, party enforcing contract will have to prove this.

Question 56

What is position of agreement with a person of sound mind who occasionally becomes unsound?

Answer 56

This may be the case when a sane man is delirious from fever, or drunken so much that he cannot understand terms of a contract or is mentally disturbed due to a sudden crisis.
1. If such person is of sound mind at time of contract it will be valid.
2. If such person is of unsound mind at time of contract, it will be void. However, party avoiding contract will have to prove this.

Question 57

What is the position of agreement if necessaries supplied to person of unsound mind?

Answer 57

If a person supplies necessities of life (e.g. paying expenses for living, medicine, studies) to a person of unsound mind or to his dependents, he can recover the reasonable price from the property of such person of unsound mind.

Question 58

Which persons are disqualified by law?

Answer 58

1. Alien enemy (citizen of a foreign country which is at war with Pakistan.)
2. Foreign sovereigns and ambassadors.
3. Convicts (i.e. a person who is found guilty and is imprisoned).
4. Insolvent.

Question 59

What is position of agreement with alien enemies? (Definition + Implication) (4 Points)

Answer 59

An alien enemy means citizen of a country at war with Pakistan.
1. A new contract cannot be made with alien enemy during war.
2. Existing contracts stand suspended.
3. No action can be taken on them.
4. However, they can be revived after war is over.

Question 60

What is position of agreement with foreign sovereigns and ambassadors?

Answer 60

Foreign sovereigns and ambassadors can enter into contracts and can sue others to enforce contracts.
However, they have immunity and cannot be sued unless they have choose to submit themselves to our courts.

Question 61

What is position of agreement with convicts?

Answer 61

During the period of imprisonment, a convict is incompetent:
1. To enter into new contracts &
2. To sue on contracts made before conviction.
This disability ends on expiry of sentence or when he is on parole.

Question 62

What is position of agreement with insolvent?

Answer 62

A person who is declared undischarged insolvent cannot make agreements to dispose his property because his property rests with official assignee/receiver.