Law of Contracts — CLAT Legal Reasoning

A contract question is a checklist. An agreement becomes an enforceable contract only when a short list of ingredients are all present — offer, acceptance, consideration, capacity, free consent, lawful object. CLAT builds its traps by quietly removing one ingredient. Know the checklist and you see the missing item before you read the options.

1. Why contracts dominates this section

Contract-based passages are the most common in CLAT Legal Reasoning because the rules are crisp and the fact-twists are endless. Remember the frame: everything here supports the principle→fact method — the passage supplies the rule; this chapter just lets you read it at speed.

The core equation:

$\text{Agreement}+\text{Enforceability by law}=\text{Contract}$

An agreement the law will not enforce (a purely social promise, an agreement with a minor) is not a contract.

2. Offer and acceptance

• An offer (proposal) is a willingness to do or abstain from something, made to obtain the other's assent.
• An invitation to offer is not an offer — a price tag, a catalogue, an auction advertisement, a menu. The customer makes the offer; the shopkeeper accepts. This distinction is a CLAT favourite.
• Acceptance must be absolute and unqualified, and communicated. A conditional "yes, if you also…" is a counter-offer, which destroys the original offer.
• Silence is not acceptance — you cannot be bound by failing to reply.
• Communication rules: an offer is complete when it reaches the offeree; acceptance binds the proposer when it is put in course of transmission (posted) and binds the acceptor when it reaches the proposer.
• Revocation: an offer can be revoked any time before acceptance is complete, but not after.

Classic trap: goods on display with a price are an invitation to offer. The shop is not bound to sell at the tagged price — the customer's request to buy is the offer, which the shop may decline.

3. Consideration — "something in return"

• Consideration is the price of the promise — quid pro quo, something done or promised in return. "No consideration, no contract" (subject to exceptions).
• It may be past, present or future, and need not be adequate — a car sold for ₹100 is valid if consent is free. CLAT loves the "inadequate but valid" point.
• It must be real and lawful, not illusory or impossible.
• Exceptions where no consideration is needed: natural love and affection between near relations (written and registered), a promise to compensate for past voluntary service, and a written promise to pay a time-barred debt.

4. Capacity to contract

A person is competent to contract only if he is (i) of the age of majority, (ii) of sound mind, and (iii) not disqualified by law.

• Minor's agreement is void ab initio — void from the very beginning. A minor cannot be sued on a contract, and a minor's agreement cannot be ratified on attaining majority.
• But a minor can be supplied necessaries (food, shelter, basic education) — the supplier can recover a reasonable price from the minor's property, not the minor personally.
• Sound mind is judged at the time of contracting: a usually-unsound person may contract in a lucid interval; a usually-sound person cannot contract while delirious or drunk.

5. Free consent

Consent is free when it is not caused by any of these five vitiating factors:

• "Consent" without freedom = the agreement is voidable by the aggrieved party (they may affirm or rescind).
• A bilateral mistake about an essential fact makes the agreement void (not merely voidable).
• Mistake of law (of the country) is generally no excuse; mistake of a foreign law is treated as a mistake of fact.

6. Void, voidable and unlawful

• Void agreement — not enforceable at all (with a minor, without consideration, with unlawful object, in restraint of marriage/trade, wagering agreements).
• Voidable contract — valid until the aggrieved party rescinds it (consent obtained by coercion/fraud/etc.).
• Unlawful object/consideration — if it is forbidden by law, fraudulent, involves injury, or is immoral/against public policy, the agreement is void.

Trap to watch: a wagering (betting) agreement is void — a winner cannot sue to recover winnings. But contracts of insurance are not wagers, because the insured has an insurable interest.

7. Breach and remedies

When one party breaks the contract, the law gives the injured party a remedy:

• Damages — monetary compensation for the loss naturally arising from the breach (the rule in Hadley v Baxendale: only losses reasonably foreseeable are recoverable).
• Specific performance — a court order to actually perform, granted where damages are inadequate (e.g., sale of a unique property).
• Injunction — an order restraining a party from doing something in breach.
• Rescission & restitution — cancelling the contract and restoring benefits received.
• Quantum meruit — payment for as much as is earned, for work already done.

8. Exam protocol

1. Run the ingredient checklist: offer → acceptance → consideration → capacity → free consent → lawful object. The missing ingredient is usually the answer.
2. Spot invitation to offer vs offer — price tags, ads and catalogues are invitations.
3. Watch for a counter-offer disguised as acceptance ("yes, but…") — it kills the original offer.
4. On a minor: the agreement is void from the start, but necessaries are recoverable from the minor's estate.
5. Classify the defect precisely: coercion/fraud/undue influence/misrepresentation → voidable; bilateral mistake or unlawful object → void.
6. Always answer from the passage's version of the rule — if it modifies the real law, follow the passage.