Feb 7, 20213 min read

Tricky Question on Contract law from Solved UPSC Law Optional 2019 Question Paper

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UPSC LAW OPTIONAL 2019 | MAINS SOLVED | 2019 QUESTION 1.(a)

ESSENTIALS FOR MAINS 2021 & 2022

The law of contracts is not the whole law of agreements, nor it is the whole law of/obligations, but it also deals with the rights and obligations of both." Elucidate.

Above-said statement is given by Salmond. He conveys the fact the law of contracts does not always deal with

Whole of law of Agreements.
Whole of law of Obligations.

We will understand the rationale behind these statements in 2 Parts.

PART 1 : WHY LAW OF CONTRACT DOES NOT DEAL WITH WHOLE OF LAW OF AGREEMENTS

Law of Contract is the law of only those agreements where the parties to the contract have the intention to create legal obligation to do or not to do something.

For example : An agreement to do for a movie or picnic cannot create a contract, and therefore, no rights or obligation are created. Thus, all agreements are not contracts, but all contracts are agreement.

INTENTION TO CREATE LEGAL RELATIONSHIP : It is a settled principle that “to create a contract there must be a common intention of the parties to enter into legal obligations”

1.Joking statements

2.Unilateral declarations,

3.Social engagements,

4.Purely domestic or family arrangements

Cannot constitute to create legal relationship.

HOW CAN WE KNOW THE INTENTION OF THE PARTIES? It can be understood from (1) the terms of the agreement and (2) the surrounding circumstances.

Generally, one can agree that social or family arrangements do not intend legal consequences to follow in contradiction to matters of business arrangement where the legal consequences is intended.

IMPORTANCE OF INTENTION TO CONTRACT | Balfour v Balfour, (1919) 2 KB 571 (CA).

FACTS OF THE CASE : Mr Balfour worked for the Government as the Director of Irrigation in Ceylon. His wife was living with him. In 1915, they both came back to England during Mr Balfour's leave. At that time, Mrs Balfour had developed rheumatoid arthritis, thereafter she did not leave England to Ceylon with her husband. When the boat was about to set sail, and he orally promised her £30 a month until she came back to Ceylon. Later, they were separated. In March 1918, Mrs Balfour sued him to keep up with the monthly £30 payments.

HELD : The Court of Appeal unanimously held that there was no enforceable agreement.

PART 2 : NOT ALL LAW OF OBLIGATIONS RESULTS FROM LAW OF CONTRACTS :

An Obligation is the legal duty to do or not to do certain act. All legal obligation do not result in contract. For example, a legal obligation not to create nuisance for others will not give rise to contract, rather it is actionable by law under the Law of Torts.

Only those obligations which arise out of agreement are contractual. In other words, only that obligation which directly contemplates to have legal consequences is a contract.

The following types of obligations do not arise out of agreements:

(1) Torts or civil wrongs.

(2) Quasi contracts.

(3) judgements of courts.

(4) status obligations—like relationships of husband and wife.

All these obligations are not contractual in nature but are enforceable in a court of law. Obligations spring from several sources.

This can be summarized as “The law of contracts is not the whole law of agreements nor is it the whole law of obligations. It is the law of those agreements which create obligations, and those obligations which have their source in agreements".