What is a Contract? Definition, Examples & Legal Framework
A contract is a legally binding agreement between two or more parties that creates mutual obligations enforceable by law. In simple terms, it is “a set of promises (written or oral) that the law recognizes and enforces.”
Examples of Contracts in Daily Life
- Buying a product – When you purchase something from a store, you enter into an agreement to pay in exchange for the item.
- Employment agreements – When you start a new job, you sign a contract outlining your role, salary, and responsibilities.
Legal Definition of a Contract
According to Section 2(h) of the Indian Contract Act, 1872, a contract is defined as:
“An agreement enforceable by law.”
This means every valid contract has two key elements:
- An agreement (offer + acceptance)
- Enforceability by law (legal obligation)
Definitions by Legal Experts
- Pollock: “Every agreement and promise enforceable by law is a contract.”
- Salmond: “A contract is an agreement creating and defining obligations between parties, where one acquires rights over another’s actions or forbearance.”
- Cambridge Dictionary: “A legal document formalizing an agreement between parties, or the agreement itself.”
The Indian Contract Act, 1872
The Indian Contract Act, 1872, is one of India’s oldest commercial laws, enacted on September 1, 1872. It applies to all Indian states except Jammu & Kashmir (pre-2019 status).
Key Features of the Act
✔ Governs all contracts in India
✔ Contains 266 sections covering agreements, enforceability, and remedies
✔ Serves as the foundation for business, employment, and trade agreements
Why Are Contracts Important?
Contracts act as legally protected promises that:
✅ Ensure fairness in transactions
✅ Protect the rights of all parties
✅ Provide a clear way to resolve disputes if terms are violated
Contracts can be formed between individuals, businesses, or governments, ensuring clarity and trust in agreements.
