Law of Contract is based on the Latin phrase pacta sunt servanda which means all promises (pacts) must be kept. In the words of Blackstone, a contract is an agreement, upon a sufficient consideration, to do or not to do a particular thing. In India, the Indian Contract Act,1872 is the controlling legislation for contracts, which formulates the general principles relating to the nature, formation, performance and enforceability of contracts and the rules relating to certain special forms of contracts like Indemnity, Guarantee, Bailment, Pledge, and Agency.
According to section 2(h) of the Indian Contract Act, 1872, "An agreement enforceable by law is contract." The term 'agreement' is also defined by the Act, vide section 2(e), which defines it as "every promise and every set of promises forming the consideration for each other." The Act further provides " All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void." It can thus be deduced that " Every contract is an agreement, but every agreement is not a contract. Thus an agreement takes the shape of a contract when there is :
competence on part of the parties to form a contract
Every party to a contract attains rights and duties relative to the rights and duties of the other party. However, while all parties to a contract may expect a reasonable benefit from the contract, it does not mean that each party will benefit to an equal measure.
A contract may be 'expressed' or 'implied' in nature.
Expressed Contract:- A contract in which the agreement of the parties has been expressed in words, either written or oral.
Implied Contract:- A contract which results from the conduct of parties in the course of transactions between them without any written or oral expression.