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CMA Foundation · Fundamentals of Business Laws and Business Communication · Essential Elements of a Contract, Offer and Acceptance

Under the Indian Contract Act, 1872, which of the following is the correct statement about the meaning of a contract?

A contract is an agreement enforceable by law. An agreement becomes a contract only when it meets the legal requirements for enforceability, so not every agreement is a contract, although every contract is an agreement.

  1. AAn agreement enforceable by law is a contractCorrect
  2. BEvery agreement is a contract whether or not the law can enforce it
  3. CA promise made between family members is always a contract
  4. DAn offer, once made, is a contract even before it is accepted

Explanation

The Act defines a contract as an agreement enforceable by law. Hence all contracts are agreements, but not all agreements are contracts. The option saying every agreement is a contract ignores the need for legal enforceability.

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