Formation of Sale Contract

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Formation of Contract

When forming a contract, various aspects must be considered to ensure its validity and enforceability. Based on the method of formation, contracts can be classified into different types: express contracts, implied contracts, quasi-contracts, and e-contracts. Each type has unique characteristics and requirements.

Types of Contracts Based on Formation

1. Express Contract

Definition: An express contract is one where the terms are explicitly stated, either in writing or orally. The essential element of an express contract is that both parties clearly state their intentions and terms of the agreement.

Legal Basis: Section 9 of the Indian Contract Act defines express contracts as those where the proposal or acceptance of any promise is made in words.

Example:

  • Person A texts Person B proposing to sell a bike for Rs. 10,000.
  • Person B calls Person A and agrees to the terms.
  • This constitutes an express contract as the terms are communicated clearly and explicitly.

Key Features:

  • Clarity: Terms are clearly articulated.
  • Communication: Can be in written or oral form.
  • Acceptance: Clear acceptance by the other party is required.

2. Implied Contracts

Definition: An implied contract is formed by the actions, conduct, or circumstances of the parties rather than written or spoken words. The agreement is inferred from the situation.

Legal Basis: The second part of Section 9 of the Indian Contract Act states that if a proposal or acceptance is made otherwise than in words, it is implied.

Example:

  • You board a rickshaw and direct the driver to your destination.
  • The driver drives you to the address and you pay him.
  • There are no spoken or written terms, but the contract is implied by conduct.

Key Features:

  • Conduct-Based: Formed by actions rather than words.
  • Mutual Understanding: Both parties understand the terms through their behavior.
  • No Explicit Communication: Terms are not verbally or written stated.

3. Quasi-Contracts

Definition: Quasi-contracts are not actual contracts but are obligations imposed by law to prevent unjust enrichment. They are created by court orders and not by mutual agreement of the parties.

Legal Basis: Quasi-contracts are recognized by courts to address situations where one party is unjustly enriched at the expense of another.

Example:

  • A bank mistakenly transfers money into your account.
  • There is no agreement between you and the bank.
  • The bank can approach the court, which will order you to return the money.

Key Features:

  • Court-Imposed: Created and enforced by court orders.
  • Prevents Unjust Enrichment: Ensures no party unfairly benefits at another's expense.
  • No Prior Agreement: Exists without prior mutual consent.

Quantum Meruit:

  • A principle applied in quasi-contracts meaning "as much as is deserved."
  • Example: If a contractor builds an expensive door instead of a small one, the court may order the homeowner to pay for the increased value added, even if not initially agreed upon.

4. E-Contract

Definition: An electronic contract, or e-contract, is formed through electronic means such as emails, texts, digital signatures, or other electronic communication methods. These contracts are also known as cyber contracts or Electronic Data Interchange (EDI) contracts.

Legal Basis: E-contracts are governed by the same principles as traditional contracts but are facilitated through electronic devices and platforms.

Example:

  • An online purchase agreement where terms are agreed upon via email.
  • Digital acceptance of terms and conditions while buying software.

Key Features:

  • Electronic Communication: Formed through electronic means.
  • Digital Signatures: Often validated with digital signatures.
  • Instant Formation: Can be created quickly and efficiently online.

Conclusion

Understanding the different types of contracts based on their formation helps in recognizing their legal implications and ensuring compliance with the necessary requirements. Express contracts require clear articulation of terms, implied contracts rely on conduct, quasi-contracts are imposed by law to prevent unjust enrichment, and e-contracts are facilitated through electronic means. Each type of contract serves different needs and situations, reflecting the diverse nature of legal agreements in modern society.