The D h aka U n iversity Studies, P a rt-F Vol. X IX ( 2 ) : 159-182 .

D e c e m b e r 2 0 0 8

FORMATION OF A CONTRACT AND ITS TECHNICALITIES:

BANGLADESH PERSPECTIVES

Mohammad Abdur Razzak*

1. Introduction
Foundation of com mercial transactions is built on what is, legally speaking,
known as “contract” . A contract, as commonly understood, is a negotiated
settlem ent which, as well, referred to as “agreem ent” . In the general sense of
the terms the expression like “agreem ent” and “contract” are used
interchangeably. However, in legal parlance “agreem ent” and “contract” are
not viewed in the same sense and are having different legal status. As
Professor Treitel puts it, formation o f a “contract” involves two-stage
procedure. In the first place, an “agreement” springs out o f a proposal and, in
the second place, a “contract” is formed out o f an agreem ent.' This
prescription, as it argued in this article, is well accom m odated in the scheme
of the Contract Act, 1872 (in concise “the Contract A ct”). Section 2 (h) of
the Contract Act states in forth right terms that an agreem ent enforceable by
law is a contract. This definition corroborates the view that “agreem ent” and
“contract” are not taken to signify same legal meaning and to constitute
same legal obligations.
The Contract Act, to a large extent, encapsulated principles o f English law
prevailed during nineteenth century. The English colonial rulers intended to
impose English secular principles of mercantile law by way of form ulating a
set o f rules, which, later on, with the assent o f her M ajesty, was enacted as
“Indian Contract Act, 1872” (now known as “Contract A ct”)having uniform
application to all Indians o f different denominations. The rules em bodied in
the Contract Act although, inter alia, construe relevant technical terms and
lay down procedure to enter into contracts suffered from some inherent
intricacy requiring judicial intervention for precision. As a result, since the
time o f the enactm ent the judges have constantly been being called to apply
their judicial mind to construe the provisions o f the Contract Act and a large

A ssistant Professor, S ch o o l o f B usiness, East W est U niversity

I Treitel G.H.: The Lciw o f C o n tra ct Eleventh Edition (2 0 0 3 ), published by S w eet &
M axw ell Lim ited., 1011 A venue Road, London N W 3 3PF, U K , p. 8. S ee also Jam es
F in lay P L C Kv. M eshhahuddin A h m ed 4 6 DLR (1 9 9 4 ) 624, para 17.
160 Mohammad Abditr Razzak

proportion o f these judicial pronouncem ents has particular bearing on the

procedure to form contracts.
This is particularly important to note here that the Contract Act does not
have any discrete part/chapter incorporating rules on the procedure to enter
into a contract. The rules are scattered across the enactm ent under
convenient heads. Same conclusion may be drawn regarding judicial
observations focusing on the procedure to form contracts inasmuch as these
were pronounced in different circumstances, in different point o f time and
were recorded in different legal journals. It is, therefore, not exaggerating to
say that this requires a thorough research to figure out the sequential steps
needed to enter into a contract as prescribed by the Contract Act and
jurisprudence developed thereunder. This article is a modest attem pt for that
end.
The article having exam ined the relevant provisions o f the Contract Act and
judicial decisions proposes to introduce a framework to form a contract and,
in order to appreciate the functional aspect o f the proposed framework, has
developed some flow charts and diagrams. As the article progresses it
realizes that the fram ework to form a contract as enunciated by the Contract
Act in 1872 is still relevant and answers the need o f the people; although the
substantive provisions building blocks for the fram ework have, due to rapid
change in the trading pattern and socio-economic condition in the twentieth
century, becom e obsolete entailing massive renovation o f the Contract Act.
In section 1 this article focuses on the provisions o f the C ontract Act to
figure out the procedure to make an agreement and in section 2 this article
further undertakes an investigation to trace out the chronological steps
required to form a contract out of an agreement.
Section 1: Formation of Agreement
2.1 Agreement in General:
Normally, agreem ent is reached by process of an offer by one party, termed
the ‘offeror’, accepted by the other, termed the ‘offeree’; and, before the
offeree can enforce the offeror’s promise, the offeree must give the
consideration requested in the offer^. Section 2 (e) o f the Act defines
“agreem ent” stating; “Every promise and every set of promises, forming the
consideration for each other, is an agreem ent.“ It appears from this
definition that an agreem ent com prises two elements: (1) promise(s) and (2)

2 H alsbu ry's L a w s o f E n glan d, contents provided by the B utterw oiths D irect O nline
S ervice, visited on 0 3 /1 0 /2 0 0 5 , Para 603
Formation o f A Contract and its Technicalities: Bangladesh Perspectives 161

consideration^. Further, a promise stems out of two elements: offer and

acceptance”*. In final analysis this may be said that an agreement is the
com bination of a number of elements, namely, proposal, acceptance and
consideration, bound together in the prescribed manner.
2.2 Procedure to Constitute Agreement
The artificiality of the definition of the term “agreem ent” provided by the
Contract Act as mentioned above would impart legal and real business sense
while the procedure of forming an agreement is exam ined. An agreement
comprises a set of human actions technically called “proposal”, “acceptance”
and “consideration” . These actions may be allowed to be aiTanged in
triangular shape so as to culminate into an agi'eement. This is discussed
below;
2.2.1 Proposal
It is universally accepted that to enter into a contract the first and foremost
thing is to have a “proposal” or “offer” . A “proposal” denotes o n e’s desire to
do or omit to do something bound up with an intention to enter into a legal
relationship thereby with another. As stated in H alsbury’s Laws of England,
“An offer is an expression by one person or group of persons, or by agents
on his behalf, made to another, of his willingness to be bound to a contract
with that other on terms either certain or capable of being rendered certain.”*’
The expression “willingness to be bound to a contract” as used in the
definition underscores that intention to enter into a legal relationship with
another is key for the validity for an offer. This subjective approach of
having an intention has impeccably been insulated in section 2 (a) o f the
Contract Act*". A ccording to Contract Act, an offer is having two essential
components: It is, in the first place an expression of the offeror's willingness
to do or to abstain from doing something. Secondly, it is made with a view
to obtaining the assent of the offeree to the proposed act or abstinence.
Seem ingly the second com ponent of the definition contem plates that an

3 It is, h ow ever, impoi'tant that prom ises and consideration that may culm inate into an
agreem ent must have reciprocity.
4 S ee section 2 (b) o f the Contract A ct, 1872.
.■i H alsbu ry's L a w s o f E n g la n d note 2 above, at Para 632. T his position o f law is also
subscribed by Prof. Treitel:Treitel note I above, at p. 8. S ee also 4 6 D LR ( i 9 9 4 ) HC D
6 2 4 , at para 17.
6 T his .section d efin es the term “Proposal” in an incoherent but robust language: “W hen
on e person sig n ifies to another his w illin g n ess to do or to abstain from d oin g anything,
with a v iew to obtaining the assent o f that other to such act or abstinence, he is said to
make a proposal “
162 Mohammad Abdiir Ruzzak

offerer shall be presumed to have an intention to bind him self legally to the
offeree while making the offer. For example, A while in a self-service shop
picks an item and places it on the cash counter saying, “I want to buy it” , he
expresses his intention to be legally bound to pay the shopkeeper stipulated
amount when the shopkeeper is agreeable to sale the same to him. This
intention on the part of the offerer is determined by what is called “objective
test”^.
However, a proposal as discussed above would not suffice to constitute an
agreement. It needs to be accepted by the offeree.
2.2.2 Acceptance
“A cceptance” in terms of law of contract denotes a positive response on the
part of the person receiving a proposal, i.e., offeree. But mere mental
determ ination would not be sufficient. It needs some overt act by which an
offeree can dem onstrate his assent to have a bargain on the terms as stated in
the proposal.^ As A ct‘^ puts it: “When the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be accepted.”
Section 7 (1) o f the Act further tunes this definition stating that an

“It is a w ell-estab lish ed principle o f the E nglish law o f contract that an offer falls to be
interpreted not subjectively by reference to what has actually passed through the mind
o f the offeror, but o b jectively, by reference to the interpretation w hich a reasonable
man in the sh oes o f the offeree w ould place on the offer.”” C en tro vin cia ! E sta te s p ic v
M erch an t In vesto rs A ssu ra n ce C o m p a n y L td [1983] C om LR 158 (C A ) as per Slade
LJ. S ee also judgm ent o f B o w en LJ in C a rlill v C a rb o lic Sm oke B a ll C o m p a n y [1893]
1 Q B 256; Court o f A ppeal, 1892 D ec. 6,7. For more on the p u zzle o f subjectivity
versus objectivity see P oole Jill : '"Case B ook on C o n tra ct Law " Sixth Edition,
published by U niversity Press, U K Pp. 17-19. T his should be noted here that W hile
addressing the question o f intention o f the contracting parties, law generally divides
the agreem ents into: ( I ) com m ercial agreem ents and (2) fam ily, d om estic or social
agreem ents. In the case o f fam ily, d om estic or social agi'eem ents, the presum ption is
that there is no intention o f the parties to create legal relations; but the presum ption is
Just other w ay round in the case o f com m ercial agreem ents: H a lsb u ry's L a w s o f
E n glan d note 2 above, at Para 7 1 9 . For fam ily or social arrangements see B alfou r v
B alfou r [1919J 2 K B 57I [CA); Jon es v P a d a va tto n [I969J 1 W LR 328 (C A);
C o w a rd v M o to r In su rers' B ureau [1963J 1 QB 2 5 9 (C A ). For com m ercial contracts
see C a rlill v Sm oke B all C om pan y [1893] 1 QB 256.
T his proposition w as made by Lord Blackburn in B rogden V M etro p o lita n R a ilw a y
C om pan y (1 8 7 7 ) 2 A pp C as 6 6 6 (HL): “...B ut when you co m e to the general
proposition w hich [the ju d ge at first instance] seem s to have laid dow n, that a sim ple
acceptance in your o w n mind, w ithout any intim ation to the other party, and expressed
by a mere private act, such as putting a letter into a drawer, co m p letes a contract, 1 must
say I differ from th a t....”
S ee S ection 2 (b) o f the Contract Act.
Formation o f A Contract and its Technicalities: Bangladesh Perspectives 163

acceptance shall be absolute and unqualified."' Prof. Treitel while exam ining
the concept of “acceptance” from English law perspective encapsulates the
provisions of the Act and observes' that an acceptance is “a final and
unqualified expression of assent to the terms of an offer.”
The term “acceptance” has com prehensively been defined in H alsbury’s
Laws of England'^; “An acceptance of an offer is an indication, express or
implied, by the offeree made whilst the offer remains open and in the
manner requested in that offer of the offeree’s willingness to be bound
unconditionally to a contract with the offeror on the terms stated in the
offer.” This definition by em ploying the word “signify” give em phasis to the
fact that to make an acceptance the assent of the offeree needs to be
com m unicated.'^ W hether or not the offeree has com m unicated his assent to
the offeror would be determined, it is suggested, by “objective test” .
Therefore, acceptance may safely be termed as final w illingness of the
offeree which has the effect of converting the proposal into a promise.
This may be noted that "promise" refers to the "proposal" which offeree has
already a c c e p t e d T h e offeree is said to have accepted the proposal when
he com pletes the com m unication o f his acceptance The legal effect of
com pletion of com m unication o f an acceptance is that neither offerer nor the
offeree can, afterward, revoke his part o f the bargain'^ without incurring
legal liability. But the performance of the promise can be enforced when it is
proceeded by what is known as “consideration”. Hence, it is appropriate here
to explain "consideration".
2.2.3 Consideration
Traditionally, English law regards “consideration” as a detrim ent to the
promisee and/or a benefit to the promisor. As Lush J puts it a valuable

10 S ection 7 (a) o f the Contract Act,

11 Treitel note 1 above, pp 16-17.
12 H alsh iiry's L a w s o f E n glan d note 2 above, Para 650.
13 C om m unication o f assent may be made expressly or im pliedly: Section 9 o f the
Contract Act.
14 Treitel note 1 ab ove, pp. 16-17. Further, to be valid, an acceptance is to be
com m unicated in the prescribed m anner.'’* "If the offer requests a prom ise, no contract
is form ed unless and until that prom ise is giverf; and, if the o ffer requests an act, no
contract is form ed u n less and until that act is perform ed.” : H a lsb u ry's L a w s o f E n glan d
note 2 above,Para 6 5 0 .
\5 Last sen tence o f section 2 (b) o f the Contract Act.
16 Law prescribes that com m unication o f acceptance is com pleted as against the offeree
o n ce it is brought to the notice o f the offeror. S ection 4 o f the Contract A ct.
17 S ection 5 o f the Contract Act.
 164 Mohammad Abcliir Razzak

consideration, in tlie sense o f the law, may consist eitlier in some right,
interest, profit, or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility, given, suffered, or undertaken by the
o th e r.A lth o u g h traditionally, both benefit and detrim ent are to be present,
it is suffice to have detrim ent to the promisee to support an act as
consideration.'^ Again, that benefit or detriment can only amount to
consideration sufficient to support a binding promise where it is causally
linked to that promise."^ The definition of consideration as given in the
Contract Act^' is largely based on the traditional approach of English law^^.
This traditional view o f benefit and detrim ent has been criticised^'^ on the
grounds, in the first place, that out of a contract both the parties are benefited
and so it is thought not to be correct to appreciate it from benefit and
detrim ent perspective. Secondly, some time “notion o f “benefit and
detrim ent” sounds artificial to support consideration.^"^ The consideration
may be interpreted to exist making the corresponding prom ise binding
although the prom isor gets no benefit^*’ and the prom isee suffers no
detriment"^’ in the course of transaction.
On the contrary. Sir Frederick Pollock provided an alternative definition
regarding the “consideration” as price for the p r o m is e .T h is definition was
adopted by House of Lords. Endorsing this view Lord Dunedin observed,
“An act or forbearance of the one party, or the promise thereof, is the price
for which the promise of the other is bought, and the promise thus given for

18 C iirriev M isa (1 8 7 5 ) LR 10 Ex 153, p. 162.

19 Treitel note 1 above, p. 6 8 Lo v w note 2 above, Para 729.
20 H alsh ury's L aw s o f E n glan d note 2 above, Para 728.
21 A ccording to S ection 2 (d) o f the Contract A ct “W hen at the desire o f the promisor, the
prom isee or any other has done or abstained from doing, or d oes or abstains from
doing, or prom ises to do or to abstain from doing, som ething, such act or abstinence or
prom ise is called a consideration for the prom ise .”
22 T his statem ent is supported by the Indian Suprem e Court in Chidam -barn Iyer v. Renga
Iyer (1 9 6 6 ) A .S C . 193-197.
2.3 Treitel note 1 ab ove, p. 68.
24 Treitel note 1 above, p. 68.
2 .s For exam p le, w here A guarantees B's bank overdraft and the promi.see bank suffers
detrim ent by advancing m oney to B, then A is bound by his prom ise, ev en though he
gets no benefit from the advance to B. Thus prom ise o f A is enforceab le although he
receives no benefit from the transaction.
26 Under an export trading bank pursuant to a letter o f credit undertakes to pay the
exporter and prom ise o f the exporter to deliver g o o d s can be enforced against it
although importer being promi.see apparently suffers no detriment.
27 Pollock: " P rin cip les o f C o n lra cl” (1 3th Ed.), p. 133.
F orm ation o f A Contract and its Technicalities: Bangladesh Perspectives 165

value is enforceable.”'*For example, against the promise of the seller to

deliver agreed goods the buyer has deposited a stipulated sum. This act,
namely, paying of stipulated am ount of money, is the value and inducement
for the promise and hence this can be legally enforced.^^
So far it is em phasized that consideration consists of perform ance against a
promise. But it is well settled that mutual promises can furnish
consideration^*^ and resulted bargain will impose binding obligations.^' Only
limitation being that these promises cannot be compelled unless the time for
performance of promises arrives"^". Further, consideration must not be
confounded with “condition precedent”^^ or “motive”^'^.

28 In D unlop Pneum atic Tyre Co. Ltd v S e lfn d g e & Co. Ltd [IQL^J A C 847, 855.
29 T his defin ition o f consideration has been rejected by Prof. Treitei on the ground that the
definition being vagu e is less helpful in determ ining the ex isten ce o f consideration in
different set o f facts. H e, how ever, prefers to fo llo w the traditional defin ition given by
Lush J though being a critic o f it.
,10 Critical v iew is that this kind o f consideration is not squarely covered by "benefit and
detriment" theory as the perform ance is suspended upto a future point: Treitei note 1
above, p. 70.
.11 T horesen Car Ferries Ltd v W eym outh Portand BE [1977J 2 Lloyd's Rep. 6 1 4 at 619.
W here a seller having a prom ise from the buyer to pay the price on a sp ecified future
date prom ises to d eliver the g ood s, these prom ises having reciprocity provide
consideration for each other.
3.1 U nlike the condition-precedent consideration is a task requested for. F ulfilm ent o f
condition precedent creates an entitlem ent to the benefit o f the prom ise: but
consideration affords legal footing to enforce the prom ise [H olm es, The C om m on Law:
Contract available at w w w .constitution.org visited on M arch 20''’, 20 0 8 : see also
T hom as v T hom as (1 8 4 2 ) 2 Q B. 85 1 ]. In Carlill v C arbolic S m o k e Ball Co.[^^ [1893] 1
Q .B . 256] the p lain tiff provided consideration for the defendants' promi.se by using the
sm oke-ball; but her catching influenza was on ly a condition o f her entitlem ent to
en force that prom ise. For the former task was requested by the defendant and not the
latter.
34 A s prof. Treitei ob serves, a m otive for m aking a prom ise is not necessarily consideration
for it in the e y e o f law; but the consideration for a prom ise is alw ays a m otive for
prom ising. [H olm es, T he C om m on Law: Contract available at w'ww.constitution.org
visited on March 20"’, 2008; see also Treitei note 1 above, p. 7 2]. T his proposition may
be w ell illustrated by the fo llo w in g exam ple: In T hom as v T hom as (1 8 4 2 ) 2 Q B. 851.
a testator shortly before his death expressed a desire that w id ow should during her life
have the house in w hich he lived. A fter his death his executors "in consideration o f such
desire" prom ised to co n v ey the house to the w id ow during her life or for so long as she
should continue a w id o w , "with the condition that she should pay £1 per annum towards
the ground rent, and keep the house in repair. In an action by the w id o w for breach o f
166 Mohammad Ahdur Razzak

It is evident from the foregoing discussion that:

(1) C onsideration m eans any task, e.g ., an act or om ission or a prom ise tiiereof;

(2) T hese tasics are requested by the prom isor and as such consideration is the m otive for
the prom ise o f the promisor;
(3) T hese tasks are perform ed or undertaken as per the desire o f the prom isor and hence
these have reciprocity with the prom ise o f the promisor;

(4 ) T o be consideration tasks are to be valuable, i.e., capable to be m easured in terms o f

m oney, albeit nominal;''^ and

(5 ) T h ese tasks are done or undertaken either by the prom isee or any third party.

2.3 Agreement: Valid/void/voidable

It is evident from the foregoing discussion that the process o f making an
agreement com m ences with a proposal and it becomes a prom ise if accepted
by the offeree and the promise becomes enforceable if and when offeree
furnishes consideration.'^*’ H ence an agreement results from a com bination of
offer, acceptance and consideration. This process may be illustrated by a
formula as shown in the following diagram:

this prom ise, the consideration for it w as held to be the w id ow 's prom ise to pay and
repair. Court regarded the desire o f the testator as m otive, not as consideration. Court
observed: a m otive for prom ising d oes not amount to consideration unless two
cond itions are satisfied, viz.; (i) that the thing secured in exch an ge for the prom ise is o f
som e value in the ey e o f the law and (ii) that it m oves from the prom isee. Thus the
testator's desire w as a m otive for the executors' prom ise, but not part o f the
consideration for it. T he w idow 's prom ise to pay and repair w as another m otive for the
executors' prom ise and did constitute the consideration.
3.S Lloyd's Bank v Bundy (1 9 7 5 ) Q .B . 326, 336, Per Lord D en n in g M.R; for more on this
point see P ollock and M ulla; "Indian Conrracr a n d S p ecific R e lie f A d " , India (1 9 9 4 ),
eleventh edition, pp. 33 -3 4 .
36 T his may be brought to the n otice o f the readers that if the consideration required from
the offeree is a prom ise, the g iv in g o f that prom ise is said to result in a bilateral or
synallagm atic contract, under w hich both sides initially exch an ge prom ises; but, if the
requested consideration is an act other than a prom ise, its perform ance is said to make a
unilateral contract, w hereupon the offeror b ecom es bound by his offer. H aishury's
Lctws o f E n gla n d note 2 above, Para 603.
Formation o f A Contract and its Technicalities: Bangladesh Perspectives 167

O ffe r

A cceptance

DIAGRAM 1

The Contract Act categorises agreements into (1) valid, (2) void and (3)
voidable. Only com pletely perfect agreements become contracts. A
com pletely valid contract is one that is enforceable by all the parties to it by
one of the prescribed r e m e d ie s .S u c h contracts must be distinguished from
those with varying degrees of imperfection, namely void‘d* and voidable'^^.
Therefore, obvious conclusion is that an agreement if so facto does not
become a contract. It requires some further prerequisites and these are
explained in the section 2 below.
Section 2: Formation of Contracts
3.1 Meaning of Contract
Section 2 (h) o f the Contract Act defines “contract” as those agreem ents that
are enforceable by law. Criteria for enforceability has been set out in section
10 o f the Contract Act and these are two folds; primary and supplementary.

37 S ee section 2 (h) o f the Contract A ct.

38 T he expression “void agreem ent” is com m on ly used in a con ven ien t term for an
agreem ent w hich is not enforced by law. Such agreem ents are som e tim e treated to be
void from the very inception [S ee M o h o rib ib ee V D h a rm o d a s G hosh (1 9 0 3 ) 30 lA
114:30 C a l5 3 9 ], The appellation "void" has also been used to describe an initially valid
contract w hich cea se s to have effect before its expiry (S ee section 56 o f the Contract
A ct, 1872).
39 A "voidable contract" is on e w hich is initially valid, but w here one or m ore o f the
parties have right o f electio n to avoid or to continue and so validate it [S ection 2 (i) o f
the Contract ActJ. U n less and until a right o f avoidance is exercised , a voidable
contract rem ains valid.
168 Mohammad Abcliir Razzak

3.2 Primary Prerequisites

There are four primary prerequisites that an agreement ought to satisfy to
enjoy enforceability and have the status of a contract, namely, ( 1) com petent
parties, (2) free consent o f the parties, (3) lawful object and consideration
and (4) agreem ent not being barred by law. It is noteworthy, aforesaid
conditions are fundamental for the validity of all agreements. In the
following pages these conditions are explained.
3.2.1 Competent parties
It is the first and forem ost criteria for the legality o f an agreement that the
parties thereto are com petent to contract. Only three categories of people are
declared to be com petent to contract. They are the persons who are of the
age of majority, of sound mind and not being disqualified from contracting
by law"*®. In other words, law declares three classes of persons as
incompetent to make contracts; they are persons below the age o f majority,
i.e. minors,"*' persons with unsound mind,"*’ e.g. a lunatic, and persons
disqualified from contracting, e.g., bankrupt."*^
3.2.1.1 Nature and Legal Effect of the Transaction
Perplexity lies in the fact that no where in the Contract Act this has been
clarified as to what would be the legal status of the contracts made by such
incompetent persons. It was in the root o f controversy am ong the lawyers,
jurists, judges. People had to wait for thirty years since the prom ulgation of
the Act in 1872 to have a judicial pronouncem ent to put at rest this
controversy. In 1903 the Privy Council in the landmark decision in
M ohoribibee V Dharmodas Ghosh'*'* observed that an contract made by a
m inor with a m ajor person is not only void, but void ab initio. So there can

40 S ection 11 o f the Contract Act.

The age o f majority is generally eighteen, excep t w hen a guardian o f minor's person or
property ha.s been appointed by the court, in w hich ca se it is tw enty-one; S ection 3.
M ajority A ct, 1875.
42 S ection 12 o f the Contract A ct d efin es the expression "person with unsound mind".
4?, S ee section 9 4 o f the Insolvency A ct, 1997.
44 (1 9 0 3 ) 30 lA 114:30 C a l5 3 9 . T his principle w as further extended to hold that a minor
w h o has made an agreem ent by m isrepresenting his age may afterward d isclo se his real
age. There is no estop p el against him: [G a d ig e p p a B h im appa M ets v B a la n g o w d a
B him an gow a d a , AIR 1931 Born 36 1 ]. On the sam e principle a m inor cannot be held
liable for his nets in tort if the liability arises out o f a contract."*"* T hen this w ill be an
indirect w ay to en force an agreem ent against a minor. H ow ever, if the tort is
independent o f a contract, he cannot escap e liability; [F a w cett v S tn eth u rst (1 9 1 4 ) 84
LJKB 4 7 3 :1 1 2 LT 309; Hari v D ulu M iya, (1 9 3 4 ) 61 Cal 1075],
Formation o f A Contract and its Technicalities: Bangladesh Perspectives 169

be no contract by a minor and hence no contractual liability arising out o f

it‘^ \ The protection o f interest o f the minor person was the prime concern of
the judiciary while delivering the judgment."*'^
As laid down in M ohoribibee’s case a minor shall incur no personal
contractual liability and as such he cannot be com pelled to shoulder any
liability thereunder. Now question arises if a minor gets into a contract
com m itting fraud as to his age, can the benefit which such m inor has
received be restored to the other party in the event o f refusal by such minor
person to fulfil his part o f the contract? This has been answered in the
negative in the M ohoribibee’s case on the ground that the major person who
enters into the contract having knowledge o f the infancy cannot claim refund
of the money. W hat if the other party is having no knowledge about the
infancy? Dom inant view is that the minor shall restore the benefit to the
other party as the contract is being avoided on the ground o f infancy"*^. On
the contrary, if a minor gets into a contract and supplies full consideration or
performs his part o f the contract, can the other party being a major person
come out of the contract on the strength o f the M ohoribibee’s case without
incurring any liability? The consistent view is that the m ajor person will be
precluded from denying performing his part o f the contract"‘^

45 Such a transaction w hich is void is a nullity (E .G .. a vendee purchasing a m inor’s land

sold by an unauthorised person such as his mother is no m ore than a trespasser in the
estate o f such minor: PLR (D ac) 627.
46 every man is the best ju d ge o f his ow n interests and it is w ell reflected on the doctrine o f
consideration: see P ollock and M ulla note 35 above. Pp. 3 3 -3 4 . But this presum ption
is suspended in the case o f children.
47 But as to the nature o f restoration con flictin g v iew s are traceable. A ccord in g to one
opinion, the major person can recover the property, if traceable, delivered to the minor
person under the contract: but he cannot seek to recover its price or dam ages, for, if
allow ed to do so, the court w ould be enforcing the contract against a minor: [A judhia
P ra sa d v C handan Lxii AIR 1937 A ll 6 I0 (F B ): G o k ed a L atch u rao i' V Bhim ayya. AIR
1956 A P 1821. H ow ever, other v iew does not allow the m inor to avail any undue
benefit hiding behind his infancy and is, therefore, ready to dircct a minor even to pay
com pensation to the other party w hen the contract is avoided: 1^^ Khcin G u t v Lakiui
Singh ILR (1 9 2 8 ) 9 Lah 701: AIR 1928 Lah 609J. T his latter v ie w is endorsed by the
Indian legislature: S ee section 33 o f the S p ecific R e lie f Act, 1963 (in force in India).
48 R eason lies in the fact that this w ould go against the m inor person and negate the
principle as laid dow n in M ohoribibee’s case [Atim AH V A sh ra f AH II D L R 185:
R a gh ava C h a ria r v S rin i-va sa (1 9 1 6 ) 4 0 Mad 308: AIR 1917 Mad 6 3 0 (F B ); G en eral
A m erican Insurance C o L id v M a d a n la l Sonulal, (1 9 3 5 ) 59 Born 656; T hakur D a s v
M l P nlti, A IR 1924 Lah 6 1 1. U lfat R a i v G aiiri S lw n k er. (1 9 1 1 ) 33 A ll 65 7 ; Jaykant v
D iirgash an kar, AIR 1970 Guj 1061. If the contract is avoided even at the suit o f an
170 Mohammad Abdiir Razzak

It is submitted that provisions o f the Contract Act applicable to the contracts

made by minors cease to address all aspects com prehensively and so these
are required to be reviewed.
3.2.1.2 Exception
The cardinal rule settled in M ohoribibee's case is subject to some exception.
Broadly speaking, contracts that are generally beneficial'*‘^ for a minor or for
his “basic necessary”'^*^ or for his full enjoyment o f the right to get
em ploym ent ensured by statute'^' can be enforced by or against the minor.
It is to be noted that above principles stated about the contracts by or on
behalf o f a m inor are applicable with necessary modifications to all contracts
where one of the parties is incompetent according to section 11 o f the Act to
enter into a contract.
3.2.2 Free Consent
It is the second requirem ent for the validity o f an agreement. A true contract
requires the agreem ent of parties freely made with full know ledge and
without any feeling of restraint*’^. Hence, section 10 of the Act entails the
parties to an agreem ent to have not only “consent”^'^but also “ free consent”^"^

innocent third party, t!:e full benefit shall be restored to the minor {W a lid a d K han y
Janak Singh AIR 1935 A ll 3 7 0 |.
49 p L R ( 1 9 6 0 ) ( W P ) 7 3 ; ll D LR 18 5 ;2 1 D L R (S C )5 4 ; 2 0 D L R (W P) 101.
.so For exam p le, section 68 o f the Contract A ct g iv e s validity to a contract by a minor if
the sam e is con clu d ed for the supply o f “basic n ecessary” to such m inor person or his
dependents. But the liability that arises under section 68 o f the A ct is not a personal
one; it is the estate o f a minor person that may be liable to be attached by the Court to
provide pecuniary benefit to the other party. W hat is necessary is a relative fact, to be
determ ined with reference to the fortune and circum stances o f the particular person.
T he station in w hich he m oves in; the d ifficu lties he is ex p o sed to; the benefits he is
entitled to etc. are basic factors to be considered. N ecessaries must be things w hich the
m inor actually needs. O bjects o f mere luxury cannot be necessaries, nor can objects
w hich, though o f real use, are e x c e ssiv e ly costly. For exam p le, supply o f food, cloths
etc. may be term ed as necessaries. S o also a contract for m edical or legal services. A
contract by a m inor w id ow to pay for her husband's funeral m ay fall under the sam e
category: se e P o llo ck and M ulla note 35 above, p. 177. A s settled in N ash V Inman
[1908] 2 KB 1. to render an infant's estate liable for necessaries "two con d ition s must
be satisfied , (1) the contract must be for good s reasonably necessary for his support in
his station in life, and (2) he must not have already a su fficien t supply o f these
necessarie.s" and it is im material w hether this fact is know n to the other party or not.
51 S ee section s 34 and 4 4 o f B angladesh Labour A ct, 2 0 0 6 .
52 P ollock and M ulla note 35 ab ove, p. 158.
53 The temT “co n sen t” d en otes that tw o or more persons agree upon the sam e thing in the
sam e sen se w hile entering into a contract: S ection 13 o f the Contract A ct.
Fonnalion o f A Contract and its Technicalities: Bangladesh Perspectives 171

for the legality of the agreement.*’^ Broadly speaking, consent of the parties
is not deem ed to be free if it is tainted by pressure, m isleading representation
or by factual variance without the know ledge o f the parties and, therefore,
the resulted agreem ent may sustain a degree of legal disability. This criteria
is shown in the diagram below:

Consent

DIAGRAM 2
This criteria demands further clarification.

54 Section 14 o f the Contract A ct d efin es this exp ression and states that a con sen t to an
agreem ent is not free if it is caused by coercion, undue in flu en ce, fraud,
m isrepresentation or m istake.
55 T his proposition has been deduced having considered the provision s o f sectio n s 10, 13
and 14 o f the Contract Act.
172 Mohammad Abchir Razzak

3.2.2.1 Consent Obtained Under Pressure

Some time parties to an agreement may be allowed to have the feeling of
restraint in one way or other to give assent to such agreem ent against their
will. The resulted agreement will not become a contract; rather it is
categorized as a voidable contract which may be set aside at the option o f the
innocent party either on the plea of “coercion” or “undue influence”'^^.

3.2.2.1.1 Coercion
Coercion involves exerting o f pressure through the use o f force or violence.
M otive o f the party resorting to use o f force or violence is important. As
section 15 of the Contract Act puts it, if a person, with an intention to cause
another to get into a contract, (I) commits or threatens to com m it any
offence^^ or (2 ) unlawfully detain or threatens to detain any property, to the
prejudice o f that another, the person said to have com m itted “coercion” .'*’*

So to constitute coercion there must be the com m itting or threatening to

com mit any offence^*^ or the unlawful detaining or threat to detain any
property^’° to the prejudice of another'’'. Coercion involves actual or
imminent use o f force but for which the person so coerced gives his consent.

,“i6 Sections 19 and 19A o f the Contract A ct entitle the innocent parties either to rescind the
contract or seek com pensation. S ee section 2 (i) o f the Contract A ct for the m eaning o f
the term “void ab le contract” . S ee also section 2 9 o f the S ale o f G ood s A ct, 1930 to
appreciate the effe ct o f such contracts in case o f sale o f good s.
51 Section 15 o f the Contract A ct refers to the o ffen ces as d efined by the Penal cod e, 1860.
.“i8 S ection 15 o f the Contract A ct.
59 W here in a case a bond w as execu ted by a person w hile under custody by an order o f a
Court having no jurisdiction, it w as held that the bond w as not binding inasm uch as the
sam e w as execu ted under duress: B anda AH B a n sp a t Singh, 4 0 I.C. 352; (1 8 8 2 ) 4
A ll 352. T he A llahabad H igh Court in this case presum ed that any con fin em en t by a
Court w ithout jurisdiction is an unlaw ful detention w hich has fiercely been criticised:
see P ollock and M ulla note 35 above, P. 20 4 ]. Sam e rule w as applied to set aside a
contract w herein a man forced his w ife and son to g iv e assent to a contract to transfer a
p iece o f land by threatening to com m it suicide: \A m iraju v. S esh am a (1 9 1 8 ) 41 M ad.
33; for E nglish v iew on duress to person see B arton v A rm stro n g [19761 A C 104
(PC)1.
60 W here a land attached by a Court belonged to a third party and such party deposited a
sum w ith p rotestseeking release o f the property, the paym ent w as regarded to have
been m ade under coercion: 17 C W N 541; 17 CLJ 4 7 8 PCJ.
61 1927 M W N 761.
Formation o f A Contract and its Technicalities: Bangladesh Perspectives 173

Simple fear o f crim inal proceeding*’’ or mere suspicion*’^ may not be

sufficient to avoid the contract on the ground of coercion.

Although traditionally “coercion” covers duress to person as well as

property, it is very recent phenom enon that the judiciary has shown its
inclination to another form of duress. Courts have accepted that a contract
can be set aside where illegitimate com mercial pressure is exerted by one
party on another and this form is often referred as “econom ic duress”*’'^. This
is questionable how far the text of section 15 of the Contract Act (without
any further am endm ent) can accom m odate the concept o f “economic
duress”— a staggering truth for modern intricated trade relationship.
However, the concept o f “economic duress” has com e under severe
criticism*'’^
3.2.2.1.2 Undue Influence
The concept of “undue influence” was introduced by the Court o f Equity^’*’ to
supplem ent the com mon law relief o f “duress” or “coercion”^^. This

62 N o o r M u h am m ad vs A b d id S a tta r Jan, PLD 1959 (Kar) 348; 22 A 224; (1 9 0 0 ) 22 ,A11.

224; (1 8 8 2 )P tm j.R e c . N o. 135.
63 29 B 149.
64 A contract may be avoid ed on the ground o f econ om ic duress if the com m ercial pressure
alleged to constitute such duress that the victim must have entered the contract against
his w ill, must have had no alternative course open to him , and must have been
confronted with co erciv e acts by the party exerting the pressure. In D SN B S iib sea L td v
P etro leu m G e o -S erv ic es ASA [2000J BLR 5 3 0 , D yson J form ulated the criteria as
requiring that the pressure or threat being applied should have the e ffe c t o f producing a
feelin g o f com p u lsion or lack o f practical ch o ice. For more cases from E nglish law see
P a o O n V Leui Yin Lon [1980] A C 6 1 4 (PC); N orth O cean S h ippin g Co. L td \> H yundai
C on stru ction Co. L td, The A tla n tic B oron [1979] Q B 705; O c c id e n ta l W orld w id e
In vestm en t C o rp v S kibs A /S A vanti, The Siboen a n d the S ib o tre [1 976] 1 Lloyd's Rep
293; for Indian approach see 5 0 M 786; 105 IC 5; 192 7 Mad 852; for A m erican
p erspective see W illiston on Contracts, 3rd ed., v o l. 13 (1 9 7 0 ), section 1603.
65 A tiyah .severely criticised this con cep t o f con sen t being vitiated by duress and
considered that it was likely to lead to irrelevant inquiries into the p sych ological
m otivations o f the party pleading duress [(1 9 8 2 ) 98 LQR 197J; see also Sm ith (1 9 9 7 )
5 6 CLJ 343 .
66 In about forteenth century the Court o f Equity w as established in Great Britain to g iv e
relief to those w h o had no rem edy under com m on law: hltp://en.w ikipedia.org/vviki/
Equity (lavv)#D eveloD m ent o f equity in England visited on 14.01.09.
67 U nder com m on law a contract could not be invalidated if con sen t to the contract was
found to have been obtained against v io len ce or a threat o f v io len ce the e ffect o f w hich
w as to bring about a coercion o f the will.*’^ S o a contract could not be set asid e under
com m on law although con sen t w as obtained by undue pressure unless the elem en t o f
v iolen ce w as established. T herefore, Court o f Equity, in order to ensure ju stice, started
174 Mohammad Ahdur Razzak

equitable relief was replicated in the Contract Act promulgated in 1872 for
the Indian Sub-Continent. According to the Contract Act a person is said to
have exercised "undue influence" to obtain consent from another if:
(1) H e is, because o f existin g relationship, stands in a dom inating p osition towards
anotiiei',

(2) D om inating party u ses his position to dictate the w ill o f tlie other and thus induces
him to enter into a contract and

(3) T he resulted contract is unconscionable w hich brings unfair advantage to the

dom inating party

The presum ption o f undue influence is applicable between two persons who
are having a relationship existing and because o f such rapport one person by
default gets higher or dominating footing. A person is said to be in the
dom inating position if he can exercise authority (either real or apparent)
over, or having fiduciary relationship with, the other.^"'^
Although undue influence usually arises in fiduciary position,™ but as
between the strangers who may have no fiduciary relations, certain forms of
coercion, oppression or com pulsion may am ount to undue influence^' and it
is immaterial whether the undue benefit squeezed out o f the contract is had
by the dom inating party or a third party^^. Accordingly, agreements
executed by a pardanashin lady^'^ or a poor and illiterate w om an’'* or any

to invalidate contracts under the relief o f “undue in flu en ce” in the ca ses where one
party induced the other to enter into the contract by actual pressure w ithout the
presence o f any v io len ce or any threat thereof; S ee Treitel note 1 ab ove pp. 4 0 5 and
408.
68 S ection 16 (2) (a)-(b ). In e ssen ce, if a person has som e in flu en ce over another person
and by m eans o f that influence has reduced that w ill o f that person to his subjection
w hatever may be the nature o f the influence: spiritual, moral, social or any other
in fluence and if the transaction is unjust then it is such coercion as is su fficien t to
constitute undue influence: [Bindu M ukhi V Sm Sarda Sundari 1954 6 D LR 97].
69 S ection 16 (2) o f the Contract Act.
70 R elationship that subsists betw een father and child, spiritual leader and his follow ers,
physician and his patient, law yer and his client etc. are the ex a m p les o f fiduciary
relationship and father, spiritual leader, physician and law yer are d eem ed to have
occup ied the p osition o f con fid en ce and are in the dom inating position: P ollock and
M ulla note 35 ab ove, Pp. 2 3 4 -2 3 5 .
71 B indu M ukhi V Sm S a rd a S u n d a ri 1954 6 D LR 97
72 P ollock and M ulla note 35 above, P. 234. T his ought to be noted that the w ordings o f
section 16 o f the Contract A ct are not w ide enough to afford relief to the innocent
parties and hen ce resp on sive ju d icial inteipretation is the last resort for the peop le with
grievance.
73 M /s Ilh ad M ills V C o m m isio n er o f Incom e Tax 1969 21 D LR Karachi 325.
F orm ation o f A C o n tra ct a n d its T ech n icalities: B an gladesh Perspectives 175

person under a threat of crim inal proceeding are fit to attract the
presumption of undue influence^*’ and as such may be avoided by the party
complaining^*’. But the relationship between mother and daughter was held
to be not appropriate for the presumption of undue influence.^^
3.2.2.2 Consent Induced by Misleading Statements:
In the pre-contract stage one party may make representation as to any matter
relevant for the transaction inducing the other party to enter into an
agreement. This information some time may appear to be misleading or
untrue. The representee may, if he enters into an agreem ent placing reliance
on such representation, be allowed^* to rescind the same or get
com pensation on the plea of misrepresentation or fraud since the contract
thus made is a voidable one.
3.2.2.2.1 Misrepresentation
One party, namely, the representor, may make false statem ent either
innocently or negligently as to any material fact for the purpose o f inducing
the other party, i.e., representee,^^ to enter into an agreem ent and the
representee gives his assent but for such inducement, the consent of the
representee is obtained by what is known as “m isrepresentation”^*^.Section
18 of the Contract Act*^' while defining “m isrepresentation” has been

74 M oham m ad Sheikh V M innddin Sheikh 1970 2 2 D LR 677.

15 P urnendu K um ar D as V H i ran K um ar D as 1969 21 D LR 9 1 8 .
76 S ection 19A o f the Contract A ct.
77 N oah C hand Vs. M st. H ossain Banu others; Noah C hand V.v, Fitlm ati Beva others
6B L D (H C D )1 73; Ref: 33 I.A. 86; A .l.R . 1920(P .C .)65. It is to be noted here that the
burden o f proof lie,s in the first instances on the party w ho raises the plea o f undue
influence. If that party proves that the other party w as not on ly in a position to
dom inate his w ill but that the transaction entered into w as uncon scion ab le, the burden
o f p roof that tlie dom inating party did not use his dom inating p osition to obtain an
unfair advantage over the other is shifted on to him: S ee section 16 o f the Contract
Act; see also Bindu M iikin V Sm Sarda Sunduri 1954 6 D LR 97; M ohan B ashi Saha V
U nited IndnstrialBank 1968 2 0 D LR 9.
78 S ee note 56 above.
79 R epresentees may be o f three kinds: (1) Persons to w hom the representation is directly
made and their principals; (2 ) persons to w hom the representor intended the
representation to be passed on and (3) mem bers o f a class at w hich the representation
w as directed: S ee P ollock and M ulla above P. 254.
80 T his may be the p osition o f modern C om m on Law: A nson, Law o f Contract 22nd Ed.,
207sqq.
81 H ow ever, the w ordings o f section 18 o f the Contract A ct has fiercely been criticised
being vague: S ee P ollock and M ulla note 35 ab ove. Pp. 2 4 6 , 257.
176 Mohammad Abdur Razzak

S'?
structured on the said principle of English law . As the Contract Act puts it,
following conducts of the representor, namely,
(1) A positive statem ent, although not true, but the representor b eliev es it to be true, or
(2) any innocent failure or breach o f duty w hich, in the first place, gains any b enefit to
the representor and, secon d ly, m isleads the representee to his prejudice, or
(3) causing, h o w ev er innocently, the representee to m ake a m istake as to the substance
o f the thing w hich is the subject o f the agreem ent
83
constitutes “m isrepresentation” ; provided that any one of these things have
been done as an inducement to cause the representee to enter into an
agreement.
3.2.2.2.2 Fraud
According to English law a representor is guilty of fraud if he makes an
ambiguous statement intending it to bear a meaning which is to his
knowledge untrue, and if the statement is reasonably understood in that
sense by the representee^"^. The Contract Act attaches same level like the
English law while defining “fraud” in relation to contracts. An act is said to
be fraudulent if the person alleged to have defrauded has deceptive mind. As
section 17 of the C ontract Act puts it, following acts, whereby to obtain
consent from another to a contract is called “fraud” ;
(1) A ny statem ent w hich the maker d oes not b eliev e to be true,

(2) the active con cealm en t o f a fact by one having k n ow led ge or b e lie f o f the f a c t ;

(3) a prom ise m ade w ithout any intention o f perform ing it;

(4) any other act fitted to deceive;

(5 ) any such act or om ission a.s the law sp ecially declai'es to be fraudulent.

As em phasised by Section 17 of the Contract Act, acts or om issions referred

above shall not be regarded as fraud unless these are accom panied by
deceptive mind*^\ However, the legal status o f a contract induced by fraud

82 P ollock and M ulla note 35 above, P. 247,

83 In case o f m isrepresentation, a representee has tw o rem edies open to him: (1) to elec t
to rescind the contract and to demand from the representor a com p lete restoration if
that is possible; or (2) to affirm the contract and sue for dam ages: S ee section s 19, 39,
64, 75 etc. o f the Contract Act. T he representee to get any o f the ab ove rem edies has
to prove: (a) the language relied upon d oes import or contain a representation o f som e
material facts; (b) the representation is untrue; and (c) the representee in entering into
the contract w as induced so to do in reliance upon it.
84 Treitel note 1 above, P. 337.
8.i T he principal differen ce betw een fraud and m isrepresentation lies in the fact that in the
one case the representor d oes not b eliev e it to be true and in the other he b eliev es it to
F orm ation o f A C o n tra ct a n d its T ech n icalities: B an gladesh Perspectives 177
pz
will be, like misrepresentation, voidable at the option o f the representee
with the right o f the representor to rely upon rule of caveat emptor^^
3.2.23 Factual Variation Without Knowledge: Mistake
“M istake” refers to an erroneous understanding o f the parties concerned as
to any m atter essential for the agreement®^. M istake that vitiates consent to
an agreement has to result from common or bilateral m isconstruction o f the
factual matters.
Consent to an agreem ent may be affected by common mistake in either of
the ways m entioned hereinafter and the agreem ent thus formed is a nullity
being void^'^ In the first place, mistake may altogether defeat mutuality
between the parties. It is at the root of every contract that the parties shall
agree upon the same thing in the same sense'^*^ and this is often referred as
true consent or consensus ad idem. If, for example, at the time o f entering
into a contract for sale o f a specific ship, parties have got different ships in
mind, they cannot be said to have agreed in the same thing in the same
sense^'. In the second place, mistake may not have the effect o f defeating the
object o f the contract; rather it may mislead the parties as to the purpose
which they contemplate. For example, parties have got into a contract
without having any knowledge that, at the time o f the contract, the subject-
matter of the contract has been destroyed. Here parties have given consent
but for the defective knowledge o f the matter and hence consent is not
deem ed to have been given freely^'.

be true though in both cases it is a m isstatem ent o f fact w hich m isleads the
representee
86 K arn aph u li P a p e r M ills Ltd. V A m atnillah 1971 23 DLR 150.
87 S ee section 2 2 and excep tion to section 19 o f the Contract A ct. Under E nglish law
principle o f caveat em ptor shall not be available as a d efen ce if the con sen t is obtained
by fraud: S ee P o o le note 7 above, P. 508,
88 Certain facts are essential to every agreem ent. T hey are: (1) the identity o f the parties;
(2) the identity and nature o f the subject-m atter o f the contract; and (3 ) the nature and
content o f the prom ise itself: A. Singh: "'Principles o f M erca n tile Law" India, (2 0 0 0 )
P. 118.
89 S ee section 2 0 read w ith section 13 o f the Contract Act.
90 S ection 13 o f the Contract A ct.
91 R affles R W ichelhaiis 2 H. & C. 906; 133 R.R 853. For a good survey on the m istake as
en visaged in section 13 o f the Contract A ct, see P ollock and M uila note 35 above, Pp.
183-197.
92 See section 2 0 o f the Contract A ct. Section 20 w ill com e into operation if (1 ) both the
parties are m istaken, (2 ) the m istake is as to a matter o f fact and (3) the fact
about w hich they are m istaken is essential to the agreem ent.
178 Mohammad Abdiir Razzak

Two points need to be clarified: In the first place, above rules shall have no
application to unilateral mistake. In case of unilateral mistake, one o f the
parties being under a mistake gives consent and hence the agreement
cannot be avoided^^ on the ground of mistake. Secondly, bilateral mistake as
discussed above shall relate to "matter o f fact" as oppose to "matter o f law ’’.
If the bilateral mistake is as to a matter of law in force in Bangladesh, this
agreement, however, remains valid. But mistake as to any foreign law shall
have same effect as mistake of fact*^"^.
3.2.3 Lawful Consideration and Object
It is the third m andatory requirement that an agreement shall be made with
lawful consideration and the purpose o f the agreement shall also be lawful.
Seem ingly, this requirem ent rather relates to the applied aspect of
consideration. This may be recalled that Act requires the presence o f three
elements for the formation o f an agreement, such as, proposal, acceptance
and consideration.'^■^However, such agreement shall enjoy the status of a
contract only when the considerations supplied by the parties are legal. As
section 23 o f the Contract Act puts it, if the consideration or object o f an
agreement is not lawful, the agreement is void. Followings are the situations
in which consideration or object is regarded to be unlawful:
(]) it is fo r b id d e n b y la w ;
(2 ) it is o f su c h a n atu re that, if p er m itted , it w o u ld d e fe a t th e p r o v is io n s o f
a n y la w ;
(3 ) it is fra u d u len t;
(5 ) it in v o lv e s o r im p lie s in ju ry to th e p e r so n o r p r o p erty o f a n o th er; or
(6 ) th e C o u r t reg a rd s it as im m o r a l, o r o p p o s e d to p u b lic p o lic y .

This may be apposite to mention here that a contract is an arrangem ent

which creates obligations for the parties thereto and these are appropriate to
be enforced by legal process.^^ This postulation entails that under a contract,
in the first place, no one can enjoy any legal rights against an act done by
him in an unlawful manner and, secondly, no one is subjected to undertake
any obligation the performance o f which will not be legal. Section 23 o f the
Act is constructed on the principle o f public policy to effectuate this legal

93 Section 2 2 states this rule w hich encapsulates the principle o f law o f sale o f good s,
nam ely, "caveat emptor" (buyer be aware).
94 S ection 21 o f the Contract A ct.
95 S ee para 2 .2 above.
96 B an gla d esh A ir S erv ic e (P vt. Lid. V'i-. B ritish A irw a ys P L C 4 9 D LR (1 9 9 7 ) A D 187,
para 27.
F orm ation o f A C o n tra ct a n d its T ech n icalities: B an gladesh Perspectives 179

prescription^^. Therefore, an agreem ent falls under section 23 is regarded as

void ab initio precluding the parties thereto from claiming any legal
remedies thereunder'^*.
3.2.4 Agreements not Forbidden by Law
The forth and final m andatory requirem ent for the validity o f an agreement
is that agreement is not expressly barred by law. This may be recalled here
that section 23 o f the Act sets out, on the ground o f public policy, some
criteria which an agreement must satisfy to becom e a contract. Bar of
section 23 shall have general application to all kinds o f agreements. In
addition to these generalise prohibition statutes may expressly regard
agreem ent o f specific category not to be legal. For exam ple, the Contract Act
has declared that certain types of contracts cannot be made lawfully. These
are as follows:^*^
( 1) A greem ents in restraint of m arriage,
(2) A greem ents in restraint o f lawful trade,
(3) A greem ents in restraint of legal proceeding,
(4) A greem ents having am biguous meaning,
(5) A greem ents by way of wager,
(6) A greem ents contingent on im possible events,
(7) A greem ents the perform ance of which has becom e either im possible or
illegal, etc.

A lthough an agreem ent satisfies all first three conditions, namely, it is

made between the com petent parties with their free consent and it is made
with lawful consideration and for lawful object, nevertheless the

A prom ises B to drop a prosecution w hich he has instituted against B for robbery, and B
prom ises to restore the value o f the things taken. T he agreem ent having m ade for illegal
purpose cannot im pose any law ful obligation upon the parties and as such law w ill
d eclin e to enforce the respective prom ises o f A and B: [Illustration (h) to section 23 o f
the Contract Act; see a lso M d. J o yn a l a n d o th e rs R u stam A li M ia a n d o th ers
4 B L D (A D )8 6 ; Ref: 21 D LR 918; 5D L R 114 and 338.
98 T o bring any contract w ithin the purview o f section 23 this has to be sh ow n that the
contract is either unlaw ful or immoral or opposed to public policy: M o h a m m a d I^ a n
Sciyed Vs. M rs. R ukshana M atin a n d o th ers 16 B LD (A D )2 2 3 ; M eh eru n n essa Kha'fun
Vi. A b d u l L a ttifa n d a n o th e r 6 B L D (A D )2 7 9 Ref: 31 D L R (A D ) 155; 38 D L R (A D ) 1;
. S.M. A n w a r Ho.ssain Vi. H aft A b d u l M a lek a n d o th ers 5 B L D (H C D )2 9 0 Ref: 17
D L R (S C )369 : P L D 19 6 5 (S .C .) 4 2 5 :2 8 D LR 238; 12 D LR 4 5 9 ; PLR (1 9 6 0 ) 2 W P 602;
21 D LR (Peshaw ar) 3 1 3 .
99 S ee S ectio n s 2 6 -3 0 , 3 6 and 5 6 o f the Contract Act.
180 Mohammad Abcliir Razzak

agreement shall not become a contract if falls under any o f the categories
of agreem ent referred to in the present heading.
3.3 Secondary or Supplementary Conditions
Apart from the four primary conditions as discussed in para 3.2 above,
tatutes’*^* state some further conditions for agreements to com ply with and
the provisions of the Contract Act are effective'®^ subject to such statutory
rules.
As this has been shown in this article that generally the Contract Act
provides the procedure for the formation of c o n t r a c t s N o particular form
is prescribed by the Contract Act for the contracts to be made. However, this
general rule is now subject to a number of exceptions im posed by statutes in
force in the country. Following forms are found to have been prescribed by
laws to make different types of contracts:
(1) Contract m ade in writing;
(2) Contract executed with proper stamp duty;
(3) Contract m ade by registered deed;
(4) Contract m ade in the presence o f witnesses etc.

This is more or less obvious that if the statutory requirem ent is that the
contract should be executed in a particular manner and that requirem ent is
also mandatory, there cannot be the slightest doubt that either the document
should be executed in that manner or not at all. If the contract is executed in
violation o f such requirem ent it is invalid.

100 This should be noted that all o f these agreem ents may not render the transaction illegal.
A greem ents in restraint o f marriage, law ful trade, legal proceedings etc. may not have
fatal con seq u en ce if the bargain is found to be reasonable. W hether or not any
agreem ent is reasonable w ould be determ ined by the court having considered the
circum stances.
101 The N egotiab le Instruments A ct, 1881; the C om panies A ct, 1994; the Procurement A ct,
2006; the B angladesh Labour A ct, 2006; the Stamp A ct, 1899;the R egistration A ct,
1908; the Transfer o f Property A ct, 1882, am ongst other statutes, worth m entioning,
that defin e form s for contracts.
102 A s secon d paragraph o f section 10 o f the Contract A ct puts it, “N oth in g herein
contained shall affect any law in force in B angladesh, and not hereby exp ressly
repealed, by w hich any contract is required to be made in w riting or in the presence o f
w itn esses, or any law relating to the registration o f docu m en ts.”
103 In particular, the elem en ts o f a contract and the process for them to be com bined so as
to culm inate into a contract.
104 PLD 1976 Lahore 1192; (1 9 8 6 ) B L D 14; PLD 1981 Karachi 170; PLR 1958 D acca
394; 1984 B L D 157. S ee also S ection s 33 and 35 o f the Stamp A ct, 1899; section 49
read with section 17A o f the R egistration A ct.
F orm ation o f A C o n tra ct a n d its T ech n icalities: B an gladesh Perspectives 181

Process of forming a contract'^"’ is shown in the following diagram;

M andatory Elements Subsidiary Elements

(Enforceability) (Enforceability)

Contract

DIAGRAM 3

105 It is subm itted that the process o f m aking a contract as described in section 2 ab ove has
been endorsed by the H igh Court D iv isio n in James Finlay PLC Vs. M eshbahuddin
A hm ed reported in 4 6 D L R (1 9 9 4 ) 6 24, para 17.
182 Mohammad Ahclur Razzak

4. Conclusion
It is evident from the foregoing discussion that law o f contract enforceable in
Bangladesh envisages a structure for entering into a contract. This
framework carefully designed by the framers o f the C ontract Act ought to be
understood by all concerned. Fair com pliance o f the procedure as laid down
by the said fram ework to conclude a contract would certainly expose the
parties to less disputes reducing the likelihood o f being em broiled in hostile
legal proceedings and would result in less disruption in the business.
It is indispensable to be m entioned here that since the prom ulgation o f the
Contract Act in 1872 we have witnessed, in the last one and half centuries,
change in the socio-econom ic condition in the Sub-Continent which
precipitated drastic change in thoughts and beliefs o f people, their mutual
relationship, trading pattern etc. making the com m ercial transactions very
intricated. Advancem ent o f technology added a new dim ension to such
intricated trading process. But it is surprising to note here that the Contract
Act as in force in Bangladesh, so far from its com m encem ent in nineteen
century, has undergone no basic changes. Hence, prescription given by the
Contract Act regarding entering into a contract, as a whole, does not seem to
be rational at all and is not suitable for trading in the reality o f twenty-first
century and hence the Contract Act as mentioned in several places o f this
work, requires massive and com prehensive overhauling.