Question

Contractual Liability arises, where:

• A. There is offer and acceptance only.
• B. There is intention to create legal relation.
• C. There is loss to one party
• D. The loss of one party is the gain of other party.

Hint:

Not all agreements are contracts. The key ingredient that turns a simple agreement into a binding contract is the 'intention to create legal relations'. Without it, even a clear offer and acceptance might just be a social promise.

Answer 1

The Correct Option is B

For an agreement to become a legally enforceable contract, several essential elements are required (as per Section 10 of the Indian Contract Act). While offer and acceptance are necessary to form an agreement, they are not sufficient to create contractual liability. A crucial element is the intention to create legal relations. The parties must intend that their agreement will be legally binding and that they can sue or be sued if it is breached. Social or domestic agreements (e.g., a promise to take a friend to dinner) are generally presumed not to have this intention, and thus are not contracts. Options (c) and (d) describe outcomes of a breach or performance, not the basis of the liability itself.