Contract Act 1872 – Ejustice
Contract Act 1872 was taken from English Common Law, and it is implemented in Pakistan as Contract Act 1872 Pakistan to regulate contracts in Pakistan. The law defines where the promises become binding to the contracting parties as we enter into many contracts daily. Each party in the contract has some rights and duties, and Contract Act defines these duties and rights.

What is a Contract?
The Contract Act 1872 Pakistan defines a contract as an agreement enforceable by law. However, the following are the essential conditions that make an agreement or promise a contract.
The contract doesn’t need to be done in writing. Yet, specific statutory provisions require the contract to be in writing. However, the arbitration clause should be in writing.
Agreement
A contract is defined as an agreement enforceable by law. In an agreement, one party sends a proposal. The other party who accepts the proposal promises to abide by it. Here, the agreement means any promise that involves consideration of both parties, and both parties are bound to comply with the promise.
Elements of a Valid Contract
Following are the elements that are essential to make a contract valid.

Validity Based Contract Types
Formation Based Contract Types
Performance-Based Contract Types

What is Offer?
When a person shows his willingness to do something or abstain from doing anything, he is said to be making an offer. Showing willingness alone is not enough. The offeror must communicate his offer to the offeree. Besides, the offer should not contain terms taken as acceptance if the offeree does not agree.
The offeror must be legally competent to enter any contract. Some other person on behalf of the offeror can also make the offer. In usual cases, the offer is made to a specific person or persons, but it can also be made to the public in general. If the offer is made to the whole world, it will convert to a unilateral contract as the acceptance by the other party is not involved, and the announcement is for everyone, willing or non-willing.
Invitation to Offer
An offer is separate from the invitation to the offer. Invitation to offer is the way to induce the offer in an attempt to proceed towards the offer. If the offeree accepts the invitation to offer, it does not result in any contract, but it is an indication that the offeree is open for negotiation.
Classification of Offer
Different forms of offer are:
The offeror must be legally competent to enter any contract. Some other person on behalf of the offeror can also make the offer. In usual cases, the offer is made to a specific person or persons, but it can also be made to the public in general. If the offer is made to the whole world, it will convert to a unilateral contract as the acceptance by the other party is not involved, and the announcement is for everyone, willing or non-willing.
Offer and Acceptance
For a contract, it is a must to have an offer and its acceptance. If there is no offer, there will be no communication. If an offer is not accepted, there will be no contract. Following are some basic questions that the parties in a contract must deal with;
Statements that are not Offer
Following are the scenarios that do not qualify to be an offer.
Termination of Offer
Some documents or statements are not offers. And until the offer is not accepted, it does not create any legal rights and can be terminated. Following are the principal modes in which the offer can be terminated.
Revocation of Offer
The offeror can revoke the offer any time before the offeree communicates to the offeror about acceptance of the proposal. The offer cannot be revoked once the acceptance is complete. Following are the ways to revoke the offer.
Acceptance
When the offeree signifies his agreement or approval to the offer, it is said as acceptance. However, the following are the rules of acceptance that must be obeyed.
Acceptance of the offer must be final, and it must also contain all the terms of the offer. However, it is not possible in the case of complex business contracts as it involves a series of proposals, counter-proposals, and agreements. Besides, in lengthy negotiations, it becomes hard to specify whether the offer or the acceptance is made or not.
Lawful Consideration
When the promisee does or abstains from doing anything at the desire of the promisor, such an act is known as consideration of the promise. Both parties must support an agreement with lawful consideration. The consideration is considered lawful until and unless;
Competency To Contract
Section 11 of the Contract Act specifies a person’s competency to make a contract. As per the Act, a person is competent to make a contract if;

If a minor does any agreement, it is void. If a minor fraudulently misinterprets his age and obtains a loan, he may be required to refund it or do the compensation at the court’s discretion. A corporation’s competency to enter into a contract is subject to its limits due to its documents of incorporation.
Free Consent
Section 13 of the Contract Act specifies consent as when two or more people agree on the same thing in the same sense. Also, consent is free when it does not involve any coercion, undue influence, mistake, fraud, or misrepresentation.
When a party takes the other party’s consent through coercion, fraud, undue influence, or misinterpretation, it is voidable at the option of the affected party. It happens when one party can dominate the other party. In the case of fiduciary relationships, the law burdens the dominating party to prove no undue influence and protects the weaker party.
Section 15 of the Contract Act explains coercion as doing or threatening to do any act forbidden by law with the intention to make someone enter into the agreement.
Section 16 of the Contract Act explains Undue Influence as when a person is in a position to dominate the will of another, and they both enter into a contract that appears or has evidence to be unconscionable. Here the dominating party has to prove that there is no undue influence.
Section 17 of the Contract Act explains Fraud as a party entering into a contract or its agent deceiving another party or their agent to enter into the contract.
Section 18 of the Contract Act explains Misrepresentation as to a party to an agreement causing a mistake that is subject to the agreement.
In case of a mutual mistake related to material facts of the contract, the agreement becomes void. However, in case of a unilateral mistake, the agreement does not become void. Also, a mistake of law does not affect the contract’s validity.
Performance of Contract
In commercial contracts, it is better to specify the time of performance of the contracts. Here the Contract Act specifies two terms, Frustration and Novation.
Frustration
When some unexpected developments occur after the contract that makes the contract’s performance impossible, these may include destruction of the subject matter, change in the law, fundamental change in the circumstances, rise in the prices, etc. These developments do not cover the introduction of the permit system and changes in market conditions unless there is an escalation clause.
In case Frustration happens, the contract automatically terminates. Also, the parties get an exemption from the performance of the contract further. In case any party has received any benefit, it must restore it or do compensation to the other party.
Novation
When both parties replace the old agreement with a new agreement, it is known as Novation.
Agency
When a person or party (known as the Principal) engages another person (known as the Agent) to act on his behalf or manage his business, it becomes Agency. The Law of Agency regulates the legal relationship with which the agent works on the Principal’s behalf. It also specifies external business relations with the Agent’s power and internal relations between Principal and agent. Check out the more services Pages on Ejustice
An Agency may come to an end;
When the Agency comes to an end, the party that does it must notify the other party. Otherwise, the party which fails to send the notice has to pay the damages. The termination of the Agency does not take effect till the agent gets to know about it
Remedies for Breach of Contract
When a party breaks the contract, it is entitled to compensate the other party who has suffered from such breach. In case of breach of a contract, the remedies include damages, specific performance of the contract, and injunction.
Damages
Damages or losses that both parties knew would occur in case of breach of the contract when they agreed to the contract. It does not include any compensation for any indirect loss.
Specific Performace of the Contract
The Specific Relief Act 1877 deals with such cases. Here, the court directs the defaulted party to perform the very obligation. However, this relief only happens in exceptional cases.
Injunction
The Contract Act also deals with a permanent injunction. However, temporary injunctions are dealt with Code of Civil Procedure 1908.
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