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  • Read the following passage and answer the question. The validity of a contract The first requirement of a valid contract is an agreement. Every promise and set of promise

Read the following passage and answer the question.

The validity of a contract The first requirement of a valid contract is an agreement. Every promise and set of promises, forming the consideration for each other, is an agreement. When a person to whom the proposal is made defines his assent, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. An agreement is valid when one party makes a proposal or offer to another party, which signifies his assent. The following are required for a valid agreement. (1) The agreement must be between two persons. It must be between an offeror and an offeree; whoever accepts the offer becomes an acceptor. Both these parties should be different, as one cannot agree with himself. (2) Both the offeror and offeree should understand the agreement in the same sense and at the same time. Sometimes, there may be invitations to offer in case of advertisement of products. 
An agreement to mature into a contract must create a legal obligation as per the provision of contract laws that is a duty enforceable by law. Any agreement which does not create any enforceability, i.e. where the parties do not have a right to approach the court of law to avail legal remedy for breach of contract, will not be a contract. This is displayed through the intention to enter into a legally binding contract different from a mere promise. Parties must know that if any of them fails to fulfil his/her part of the promise, he/she will be liable for the failure of the contract. Consideration is described as something in return. It is also vital for the validity of the contract. A promise to do something or to provide something without anything in return will not be enforceable at law and, therefore, will not be valid. Consideration need not be in kind or cash. A contract without consideration is a wagering contract or betting. Besides, the consideration must also be lawful. There is no requirement for these principles to only apply to natural persons; they are equally applicable to corporations that qualify as legal persons.

Question :-  Company X, a conglomerate, owns both a paper corporation and a publishing corporation. The paper corporation is experiencing financial difficulties and requires immediate funding for its operations. The publishing corporation, also owned by Company X, offers a loan.

 

Option: 1

This is a valid contract as two legal entities are involved.

 


Option: 2

The same entity controls both corporations. There are no two parties involved, and the contract is invalid.

 


Option: 3

The contract is valid as an offer and acceptance were provided.


Option: 4

 None of the above.

 


Answers (1)

best_answer

The same entity controls both corporations. There are no two parties involved, and the contract is invalid. As it is mentioned in the question that both the wings were of the same company and no other person was involved a party cannot come in contact with ownself.

 

Posted by

Ritika Harsh

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