In-Depth: Contract Law (Application)

CLAT Application & Relevance

Importance: VERY HIGH. Contract law is another foundational area often featured in Legal Reasoning passages. CLAT will provide you with a principle related to contract formation (e.g., offer, acceptance, consideration, capacity) or breach of contract. Your task is to apply this given principle strictly to the facts of a scenario to determine if a valid contract exists, if it has been breached, or if certain conditions are met.

How it's tested: Identifying elements of a valid contract; matching factual actions to legal terms like 'offer' or 'acceptance'; determining if a contract is enforceable or voidable based solely on the provided rule and facts; understanding how specific actions/omissions might constitute a breach.

Section 1: Core Concept - The Principle-Fact-Application Model in Contract Law

Contract Law deals with agreements between two or more parties that are legally enforceable. The formation of a valid contract typically requires several essential elements.

Essential Elements of a Valid Contract (Will be Defined in Principle)

Though the principle will define these, common elements often seen in principles include:

Offer: A clear proposal made by one party to another, showing willingness to do or abstain from doing something, with a view to obtaining the assent of the other.
Acceptance: Unqualified assent to the terms of the offer. It must be communicated.
Consideration: Something of value exchanged between the parties (e.g., money, goods, services, a promise). It is the 'price' for the promise.
Capacity: Parties must be legally competent to contract (e.g., generally, not minors, not of unsound mind).
Free Consent: Agreement must not be induced by coercion, undue influence, fraud, misrepresentation, or mistake.
Lawful Object & Consideration: The purpose and consideration of the agreement must be legal and not against public policy.
Intention to Create Legal Relations: Parties must intend their agreement to be legally binding.

The Principle-Fact-Application (P-F-A) Strategy (Revisited for Contract Law):

Understand the Principle (Legal Rule):
- Break down the principle's definition of a contract or a specific contractual concept (e.g., what constitutes an offer, what makes it voidable).
- Pay close attention to all conditions and exceptions.
Analyze the Facts (Scenario):
- Identify all parties involved, their actions, and communications.
- Look for elements that align with the principle's requirements (e.g., a promise, an action taken, a communication).
Apply the Principle to the Facts (Match):
- Systematically check if each necessary element of the contract (as defined by the principle) is present in the facts.
- If a specific rule on revocation, breach, or a defense is given, apply it meticulously.
- DO NOT use outside legal knowledge, even if you think you know the "real" law.
Formulate the Conclusion: Based solely on the principle's application to the facts, determine if a valid contract exists, if it's breached, or what the outcome is.

Section 2: Solved CLAT-Style Examples (Application-Focused)

Example 1: Application of Offer and Acceptance

Principle: "An offer must be clear, definite, and communicated to the offeree. Acceptance must be absolute, unqualified, and communicated to the offeror. A contract is formed when a valid acceptance is communicated to a valid offeror."

Facts: "Mr. A wrote a letter to Mr. B stating: 'I might consider selling my law library for ₹1,00,000. Let me know if you are interested.' Mr. B immediately replied, 'I accept your offer to sell your law library for ₹1,00,000.' Mr. B then sent the acceptance letter by post. Before Mr. A received Mr. B's letter, Mr. A sold the library to Mr. C."

Question: "Is there a valid contract between Mr. A and Mr. B as per the given principle?"

Yes, because Mr. B accepted the offer.
No, because Mr. A's statement was not a definite offer.
Yes, because the acceptance was absolute and communicated.
No, because Mr. A sold the library to Mr. C before receiving acceptance.

Detailed Solution (P-F-A):
1. Principle Analysis: Offer must be "clear, definite, and communicated." Acceptance must be "absolute, unqualified, and communicated." Contract formed when "valid acceptance is communicated to a valid offeror."
2. Facts Analysis: - Mr. A: "I might consider selling..." - Mr. B: "I accept your offer..." - Mr. A sold to Mr. C BEFORE receiving Mr. B's letter.
3. Application: - Was Mr. A's statement a "clear, definite" offer? No. The words "I might consider" indicate a mere invitation to negotiate or an expression of interest, not a firm offer ready for acceptance. - Even if it were an offer, acceptance needs to be communicated to the offeror. While Mr. B sent the letter, Mr. A sold the library before *receiving* it, implying that acceptance might not have been fully communicated to Mr. A's knowledge, and more importantly, the initial statement itself was not a valid offer.
4. Conclusion: Since the initial statement by Mr. A was not a clear and definite offer as required by the principle, no valid contract could be formed even if Mr. B's acceptance was otherwise valid.
Answer: Option (b).

Example 2: Application of Free Consent (Coercion)

Principle: "Consent is said to be free when it is not caused by coercion. Coercion is the committing or threatening to commit any act forbidden by law, or the unlawful detaining or threatening to detain any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement."

Facts: "Mr. A, a seasoned lawyer, threatened to file a false defamation case against Mr. B's family members, an act punishable under law, if Mr. B did not agree to sell his property to Mr. A at a very low price. Fearing the false case, Mr. B signed the agreement to sell his property to Mr. A. Mr. A genuinely intended for Mr. B to enter into the agreement by this threat."

Question: "Is Mr. B's consent to the agreement free, as per the given principle?"

Yes, because Mr. A did not physically harm Mr. B.
No, because his consent was caused by coercion.
Yes, because Mr. A intended for Mr. B to enter into the agreement.
No, because the price offered was very low, making the contract unfair.

Detailed Solution (P-F-A):
1. Principle Analysis: Consent is NOT free if caused by coercion. Coercion elements: (1) committing/threatening forbidden act (or unlawful detaining property), AND (2) to prejudice of person, AND (3) with intention to cause agreement.
2. Facts Analysis: - Mr. A "threatened to file a false defamation case." Is this "an act forbidden by law"? Yes, filing a false case is generally punishable. - Is it "to the prejudice of any person"? Yes, Mr. B's family would be prejudiced. - Was it "with the intention of causing any person to enter into an agreement"? Yes, "if Mr. B did not agree to sell his property..." and "Mr. A genuinely intended for Mr. B to enter into the agreement by this threat."
3. Application: All conditions for coercion as defined by the principle are met. Therefore, Mr. B's consent is not free.
4. Conclusion: Mr. B's consent was caused by coercion.
Answer: Option (b).