For your 1st semester LLB contract law exam, here's a detailed breakdown of **Unit 1: Formation of Contract**, covering the important topics you'll need to focus on:
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### 1. **Agreement and Contract**
**Agreement**: An agreement occurs when two or more parties come to a mutual understanding about a certain action or transaction. In legal terms, every agreement must consist of a valid **offer** by one party and a **acceptance** by the other.
**Contract**: A contract is an agreement enforceable by law. According to **Section 2(h)** of the Indian Contract Act, 1872, a contract is defined as "an agreement enforceable by law." Every contract is an agreement, but not every agreement is a contract. For a valid contract to exist, the agreement must create legal obligations between the parties.
**Distinction between Agreement and Contract**:
- **Agreement**: Simply a promise or set of promises (not necessarily legally binding).
- **Contract**: An agreement that the law will enforce.
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### 2. **Definitions**
- **Offer (Proposal)**: An offer is an expression of willingness to do or abstain from doing something, with the intent that it shall become binding upon acceptance.
- **Acceptance**: Acceptance is when the person to whom the offer was made agrees to the offer in its entirety, without any conditions. It creates a contract between the parties.
- **Consideration**: As per **Section 2(d)** of the Indian Contract Act, 1872, consideration refers to something of value that is promised in exchange for a service, goods, or other promises.
- **Consensus Ad Idem**: This refers to a meeting of the minds, which is necessary for a valid contract. Both parties must agree to the same thing in the same sense.
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### 3. **Classification of Contracts**
Contracts can be classified based on different criteria:
- **Express Contracts**: Formed by explicit words, either written or oral.
- **Implied Contracts**: Created by the conduct of the parties.
- **Executed Contracts**: Where both parties have performed their obligations.
- **Executory Contracts**: Where performance is yet to be completed.
- **Bilateral Contracts**: Involve mutual promises between two parties.
- **Unilateral Contracts**: One party makes a promise, and the other party performs an action to accept.
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### 4. **Offer and Acceptance**
For a valid contract to be formed, there must be a **lawful offer** and **lawful acceptance**.
- **Offer**: It must be communicated to the offeree and should indicate an intention to enter into a contract.
- Offers can be **specific** (made to a particular person) or **general** (made to the public at large).
- **Acceptance**: Must be communicated to the offeror. It must be unconditional and absolute. A counter-offer or modified acceptance is not valid acceptance and negates the original offer.
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### 5. **Communication**
According to **Section 4** of the Indian Contract Act:
- **Communication of an offer** is complete when it comes to the knowledge of the person to whom it is made.
- **Communication of acceptance** is complete as against the proposer when it is put into a course of transmission to him so as to be out of the power of the acceptor.
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### 6. **Revocation of Offer and Acceptance**
Revocation is the withdrawal of an offer or acceptance.
- **Revocation of Offer**: According to **Section 5** of the Indian Contract Act, an offer can be revoked at any time before acceptance but not after.
- **Revocation of Acceptance**: Acceptance can also be revoked before the communication of the acceptance reaches the offeror.
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### 7. **Essential Elements of a Valid Contract**
For an agreement to be a contract, it must have the following elements:
- **Offer and Acceptance**: There must be a lawful offer and a lawful acceptance.
- **Intention to Create Legal Relations**: The parties must intend to create legal obligations.
- **Lawful Consideration**: Consideration must be lawful and must move at the desire of the promisor.
- **Capacity of Parties**: The parties must be competent to contract (i.e., must be of legal age, sound mind, etc.).
- **Free Consent**: Consent must be given freely, without coercion, undue influence, fraud, misrepresentation, or mistake.
- **Lawful Object**: The object of the contract must be lawful.
- **Not Declared Void**: The contract must not be one which the law specifically declares void.
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### 8. **Invitation to Offer**
An **Invitation to Offer** is not an offer in itself but an invitation for others to make an offer. For example, a display of goods in a store or an auction. The actual offer is made by the buyer when they propose to purchase the goods, and the acceptance comes when the seller agrees.
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### 9. **Tenders**
A **tender** is an offer to carry out work, supply goods, or provide services at a specified price. Tenders can either be an **open tender** (anyone can submit) or a **closed tender** (only invited parties can submit). It becomes a contract when the tender is accepted.
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### 10. **Consideration**
**Consideration** is an essential element of a valid contract. It refers to something of value given by both parties to the contract that induces them to enter into the agreement to exchange mutual performances.
As per **Section 25** of the Indian Contract Act, an agreement without consideration is void, except in some specific cases:
1. An agreement made out of **natural love and affection** between close relatives.
2. A promise to compensate someone for **past voluntary service**.
3. A written promise to pay a **time-barred debt**.
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### Conclusion
Understanding these fundamental principles of contract law will help you navigate the key aspects of **contract formation**. Be sure to memorize the statutory references (Indian Contract Act, 1872) and case law examples to illustrate your points during the exam.