Legal Environment for Business in Nepal 5 March 2017 LAW OF CONTRACT Legal Environment for Business in Nepal 5 March 2017 Saroj Shrestha

LAW OF CONTRACT Law of Contract forms the oldest branch of law relating to business transaction. People formulates some rules or make agreements to do or not to do something, they intend. Some of such agreements are dependent only on their mutual belief or understanding which they are not legally bound to perform and some are binding on them, which are contracts. The law of contract particularly relates to an agreement which is enforceable by law.

Law of Contract Nepal has separate law. In 2023 B.S., Contract Act was enacted but it was repealed in 2056 by enacting new Contract Act, 2056. Indian has also separate law, Indian Contract Act, 1872. Meaning of Contract A Contract is a legal agreement created by an exchange of promises between two parties to do or not to do something. In other words, an agreement made between at least two parties to do or to abstain from doing something and creating contractual

Meaning of Contract rights and obligations for themselves, which the law will enforce is called contract. It gives a right to one party and casts corresponding duty on another party. Where it is broken, the law gives a remedy and recognizes its due performance as a duty as well. Salmod “A contract is an agreement which creates and defines obligations between the parties.”

Meaning of Contract J.B. Sounders Esce “A contract is an agreement between competent persons upon a consideration to do or to abstrain from doing some act.” Halsbury “ A contract is an agreement made between two or more persons which is intended to be enforceable at law.” Section 2 (h) of Indian Contract Act, 1872 “An Agreement enforceable by law is a contract.”

Meaning of Contract The Contract Act, 2056 has define the term contract under sec. 2 (a) “ A Contract is an agreement between two or more persons to do or not to do something, which can be enforceable by law”.

Difference between Agreement and Contract Basis of Difference Agreement Contract Creation The union of offer and acceptance creates agreement The union of agreement and its enforceability creates contract Legal Obligation Agreement alone does not create legal obligation to perform Contract alone creates legal obligation to perform Binding nature Agreement is not binding on the parties to it Contract is binding on the parties to it. Scope Agreement is a vague term Contract is a limited term Inclusion Agreement does not include Contract Contract includes agreement. 17 November 2018

Essential Elements of Contract Plurality of Parties: At least TWO parties Offer and acceptance Intention to create legal relationship Free Consent Capacity to contract/Competency Lawful consideration Lawful Object Agreement not expressly declared void Clarity and Certainty Possibility of Performance

If you have any questions or concerns, please discuss .. Thank you ! Saroj Shrestha