1902 Encyclopedia > Contract


CONTRACT is a bargain or agreement enforceable by law. The law of contract occupies so large a space in all civilized systems of law, that only a few of its more leading principles can be conveniently stated here. There is a general harmony in the jurisprudence of modern nations on this subject which is not to be found in other departments of law. The folia wing definitions are taken from the Indian Contract Act, 1872 :—

a. When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.
b. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.
c. The person making the proposal is called the promiser, the person accepting the proposal the promisee.
d. When at the desire of the promiser, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called the consideration for the promise.
e. Every promise and every set of promises forming the consideration for each other is an agreement.
/. Promises which form the consideration or part of the considera-tion for each other are called reciprocal promises.
g. An agreement not enforceable by law is said to be void.
h. An agreement enforceable by law is a contract.
i. An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.
j. A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

These definitions, with some changes of expression in the direction of greater precision, are in effect the same as those which are found in English law books. The phrase " void contract," which would be a contradiction in the Indian definitions, is frequently used in English law.

The exchange of proposals and acceptances by correspondence gives rise to some peculiar difficulties. An offer or proposal may be revoked any time before acceptance; and it is revoked when notice to that effect is given to the promiser. So much is clear and free from difficulty. But when letters containing proposals or acceptances are delayed or misdirected, it is not very easy to say whether there has been a contract or not. When A wrote to B, " I offer you 800 tods of wether fleeces, &c," " receiving your answer in course of post," but misdirected the letter, which arrived late, and B's answer accepting the offer not arriving at the expected time, A sold the goods to some one else, it was held that as the delay was caused by A's default, it must be taken as against him that the answer did not arrive in course of post (Adams v. Lindsell, 1 B. and Aid. 681). In cases following this some of the judges seem to be inclined to hold that a proposer is bound by an acceptance being posted to him whether it reaches him or not, and others that he is not bound unless he actually receives the accept-ance. An acceptance of a proposal must be unqualified, otherwise there is no contract ; the introduction of a new condition by the acceptor, or a reference to something still to be done, prevents the contract from being completed. To constitute a contract the terms must be certain ; e.g., an agreement to take a house, " if it were put into thorough repair, and the drawing-rooms handsomely decorated according to present style," has been rejected as too vague. A contract of course may be concluded by mere conduct, without the exchange of a single word, and multitudes of contracts in small matters of constant occurrence are so concluded. These are called implied contracts—a phrase, however, which covers two very different things—(1) a real contract which may be inferred as a fact from the conduct of the parties, and (2) a quasi contract, in which the law will treat the parties as if they had made a contract.

Certain classes of persons are under peculiar disabilities in matters of contract, viz., infants, lunatics, and married women. 1. As a general rule at common law contracts made by an infant (a person under twenty-one years) are voidable, unless they are in some way for his benefit, and in particular for " necessaries." By the Infants' Belief Act, 1874, contracts for repayment of money lent to infants, or for payment of goods other than " necessaries," are made absolutely void ; and no action can be brought, even if they are ratified after full age and for a new consideration. The question what are necessaries is to be decided by the court and jury on the circumstances of the case, including parti-cularly the rank in life of the infant. The protection of infants has been extended by the Court of Chancery to " expectant heirs " as they are called, i.e., persons who borrow money on the credit of their expectations. The principle is a survival from the times when usury was con-sidered wrongful, and the preservation of great families a public duty, and is utterly indefensible on any other con-siderations. 2. A married woman, being in the eye of the law merged in her husband, cannot bind herself by contract. 3. Contracts made by a lunatic are voidable, except where his state of mind was not known to the other contracting party. The principle is extended to drunken-ness. Eor further information as to such disabilities see under the respective headings. The general rule as to corporations is that they can only make binding contracts under their common seal, excepting in cases of " con-venience almost amounting to necessity" (see CORPORATIONS).

Of the technical terms mentioned above the most important, and certainly the most characteristic, of English law is consideration. A consideration is essential to the validity of every contract unless it be made in writing under seal. The meaning of the word is quite accurately expressed by a pbrase used in one of the earliest cases on the subject—it is strictly a quid pro quo. Something, whether it be in the nature of an act or a forbearance, must move from one of the parties in order to support a promise made by the other. A mere promise by A to give something to B cannot be enforced unless there is some consideration " moving from B." Such a promise the early lawyers called a nude or naked promise—in imitation of the phrase in Boman law, nudum pactum, which does not, however, mean a promise unsupported by a consideration, but a contract destitute of certain essential legal formalities. But while every contract requires a consideration, it is held that the court will not inquire into the adequacy thereof; any consideration will do. Inadequacy of consideration, however, may be important where a contract is to be set aside on the ground of fraud.

Modern English law requires no formalities to make a contract enforceable, unless in certain special cases. The ancient rule both in early English and Roman law made certain formalities essential, unless in certain special cases. The ancient rule is thus the modern exception. The exceptions to the general rule in English law are the following : —

1. Contracts within the Statute of Frauds, 29 Car. II. c. 3.—The fourth section of this important Act specifies certain classes of contracts in which '' no action shall be brought" unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized. Such contracts are—(1) any special promise by an executor or administrator to answer damages out of his own estate ; (2) any promise to answer for the debt, default, or miscarriage of another person; (3) any agreement made on consideration of marriage ; (4) any contract or sale of lands, tenements, or hereditaments, or any interest in or concerning them ; (5) any agreement that is not to be performed within the space of one year from the making thereof. The 17th section enacts that no contract for the sale of any goods, wares, or merchandize for the price of £ 10 sterling or upwards shall be allowed to be good, except the buyer shall first accept part of the goods so sold, and actually receive the same, or shall give something in earnest to bind the bargain or in part payment; or unless some memorandum or note in writing of the said bargain be made and signed by the parties to be charged, or their authorized agents. The difference between the two sections should be noted. Contracts under the 17th section are simply void ; contracts under the 4th are not void, but they are not enforceable. The 4th section is a law of procedure, and therefore a contract of the kind specified therein validly made in a foreign country could not be enforced in England, whereas a valid contract made abroad, which would be wholly void if made in England, under the 17th section, might be enforced in England. And again, money paid under an agreement made unenforceable by section 4 could not be recovered back.
2. Contracts of corporations, already alluded to.
3. Negotiable instruments, which must, of course, be in writing.
4. Other CAses in which writing is required are transfer of ships, assignments of copyright, and ratification of debts barred by the Statute of Limitations.

To contracts made by deed (i.e., under seal) the law attributes certain qualities which do not belong to simple contracts, i.e., contracts whether verbal or in writing without seal. The peculiar properties of a deed are thus described :—" It works a merger ; it operates by way of estoppel ; it requires no consideration to support it ; it will in some cases bind the heir of the covenanter or obligor; it can only be discharged by an instrument under seal, by the judgment of a court of competent authority, or by Act of Parliament." The language of the law-books is that from the solemnity of a deed the law itself will imply the existence of a consideration, a formula designed to bring the exceptional case of deeds within the general legal theory of consideration, and by no means to be accepted as an historical explanation. The subordinate agreements in a deed are termed covenants. The formal definition, as given in Piatt on Covenants, is " an agreement between two or more persons by an instrument in writing sealed and delivered, whereby some of the parties engage, or one of them engages with the other or others of them, that some act hath or hath not been already done, or for the performance or lion-performance of some specified duty." See DEED.

An agreement is said to be void for impossibility when the thing contemplated is in itself impossible, as contrary to the course of nature, and when it is by construction of law impossible, e.g., to create a new manor. But when the thing is not in itself impossible, but is or becomes impossible in fact, an unconditional agreement is not thereby void. Thus a contract to load a full cargo of guano at a certain island does not become void by the fact that there is not enough guano on the island to make a full cargo. In a recent case (Thorn v. Lord Mayor of London) a con-tractor, who had undertaken to build a bridge according to specifications supplied by defendant, found it impossible to execute part of the work according to specification, and it had to be executed in another way. It was held that there was no condition that the plans should be reasonably prac-ticable, and the plaintiff was not allowed to recover for work executed in an impossible attempt to comply with the specifications. In another case, a contractor bound himself under penalties to finish some buildings within a certain time, with any alterations and additions required by the defendants, and no extension of time was to be allowed for such alterations, unless expressly granted by defendants. It was held that the contractor could not excuse himself for non-completion within the proper time by showing that the alterations and additions made it impossible.

Besides the contracts which are void through defect of form or want of capacity in the parties, there is a large class of agreements which the law refuses to recognize on account of the character of the contemplated action. These may be reduced to three main divisions—illegal contracts, when the thing to be clone is forbidden by law ; immoral contracts, when the consideration belongs to the indefinite class of things recognized as immoral; and contracts, against public policy, i.e., certain wide and more or less indefinite principles of government. In some cases, the act of agree-ment is in itself a criminal offence, for which see CONSPIRACY. An agreement to commit an offence, as to burn a house, or kill a man, or an agreement to do a civil injury to another, would be illegal. Promises made in con-sideration of illicit cohabitation in the future are void as immoral; if the consideration is illicit cohabitation in the past, it is of course no consideration, and a promise founded upon it will be void unless expressed in a deed. Of agreements which are void as being against public policy, the most important class is that of contracts in restraint of trade. The leading authority on this subject is the case of Mitchell v. Reynolds (1 Smith's Leading Cases). The law, it seems, is so jealous of the freedom of the trader, that it will not allow him to part with it on any considera-tion. " It is the privilege of a trader in a free country, in all matters not contrary to law, to regulate his own mode of carrying it on according to his own discretion and choice. If the law has regulated or restrained his mode of doing this, the law must be obeyed. But no power short of the general law ought to restrain his free discretion." It has been suggested that the rule dates from a time when a covenant by a man not to exercise his own trade meant a covenant not to exercise any trade at all,—every man being obliged to confine himself to the trade to which he had been apprenticed. At any rate, it is difficult to reconcile this protection of the individual will, carried to the point of absolutely limiting its exercise in one class of cases, with modern principles as to freedom of trade and contract. And the law itself breaks in upon its own theory by admitting that contracts which are only in partial restraint of trade may be good. A contract not to carry on the business of an ironmonger would be bad ; but a contract made by the seller ot an ironmonger's business not to compete with the buyer would be good. It is held that to make such a promise binding, it must be founded on a valuable consideration, must not be unlimited as to the area over which the restriction is to extend, and must not otherwise go beyond what is reasonably necessary for the protection of the other party. On the whole, it would be simpler to leave individuals to make what contracts they please in this as in other matters. The public policy which disallows contracts in restraint of marriage depends on a different set of considerations. A contract not to marry at all is void; in one case it is described as a contract to omit a moral duty, and tending to depopulation, " the greatest of all political sins." But apparently a contract by a widow not to marry is not void. The whole doctrine of public policy appears to have grown up out of the efforts of judges to counteract the admission of wagers in the common law as legal contracts. In their desire to avoid enforcing them in particular cases, they developed a theory of state interests of startling wideness and originality. A wager about the death of Napoleon I. was held void because it gave one party an interest in keeping the king's enemy alive, and the other an interest in putting him to death. (See Pollock on Contracts, p. 252.)

Contracts may be vitiated by mistake, misrepresentation, fraud, undue influence, &c. Mistake, to avoid a contract, must be such that there was no real agreement at all, or that the real agreement was erroneously expressed; and money paid under a mistake as to fact may be recovered. The general rule is that relief will be given against mistake as to fact, but not against mistake in law. Contracts induced by fraud, misrepresentation, &c, are in general not void but voidable at the instance of the party injured or imposed upon.

The common law did not permit the benefit of contracts to be assigned so as to give the assignee a right of action in his own name—a right which was, however, recognized in equity. By the Judicature Act, 1873, section 6, a legal right is created in the assignee when the assignment is absolute and in writing, and notice in writing given to the debtor.

The only remedy for breach of contract given by the common law was an action for the sum certain due by the defaulter, or for damages, to be ascertained by a jury. The mere payment of damages would in many cases not be a complete satisfaction to the other party, and the Court of Chancery accordingly gave in certain cases decrees for the specific performance of the contract.

The best English works on Contract are those by Addison, Chitty, and S. Martin Leake. The Principles of Contract at Lav; and in Equity, by F. Pollock, is a recent work of great merit. (E. R.)

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