NATURE AND CLASSIFICATION OF CONTRACTS 1. Definition and general features.—A contract is an agreement by which one or more persons bind themselves in favor of one or more other persons to give or to do or not to do something. It is essential to a contract that there be an agreement. A contract, to be valid and enforceable, must give rise to an obli gation. An obligation is a legal bond by which one person is bound in favor of another to give or to do or not to do a certain thing. A true contract is, there fore, an agreement, but every agreement is not a con tract.
If we may repeat, a contract must give rise to an enforceable obligation. The word "obligation" is de rived from the Latin word obligare, meaning to bind together. Two persons are thus bound towards each other and in order that they shall be liberated, the bond must be severed by payment; that is, by the handing over of money, or the doing of something, or the refraining from doing something. In other words, the contract must be executed.
When we say that there is an obligation, we mean that upon one of the parties to the contract a duty is laid, the fulfilment of which can be enforced by the other party. The distinction may be made clear by explaining that a moral obligation lacks this feature. A moral obligation cannot be enforced thru the courts.
In a famous case of Laidlaw vs. Sage,' this prin ciple was-Clearly brought out. Russell Sage was in his office one day when a lighted bomb was thrown in thru the window. Terrified, lie pushed his secretary between himself and the bomb, with the result that the secretary was seriously injured by the explosion. The latter brought action against Sage, claiming in demnity on the ground that he had saved Sage from great injury, and that he himself had been seriously hurt. The case was thrown out, on the ground that Sage acted in a moment of extreme panic, and on the ground that it was not proved that the secretary would not have been as much injured had Sage not acted as he did. There was no doubt that there was a moral duty on the part of Mr. Sage to compensate
his secretary, but the court held that his obligation was an imperfect obligation.
In order that a true contract must exist, there must be: (a) Parties legally capable of contracting; (b) Their consent legally given; (c) Something which forms the object of the con tract; (d) A lawful cause or consideration.
The matter may be expressed more simply by say ing that there must be an agreement, and there must be a lawful obligation; that is, an enforceable obliga tion.
2. dgreement in order that a person shall be bound, he must have agreed to be bound. There must be a common intention. If the terms of the alleged contract are so doubtful or so contradic tory that the court cannot ascertain definitely what, the terms were, an action to enforce the contract will be dismissed, because of the inability of the court to de termine whether there was a contract, or what were its terms. Thus if A asks B whether he will take $200 for a certain horse and B replies, "Very possibly I will," there cannot be said to have been an agree ment on the part of B that he would sell A his horse.
A person will be bound where he authorizes an agent to make a contract on his behalf, or he will be bound to pay the debts of a succession which he has accepted; by accepting he has contracted to take the assets and to pay the debts of the succession; he has acted by his free choice and voluntarily, and thus has come under an obligation.
A person may also come under an obligation by reason of some quasi contract. For example, if in paying an account A overpays, there is an obligation on the part of the person receiving payment to ac count for such overpayment. Under the French law, tho apparently not under the English law, if a person discovers that the water-pipes in the house of his neighbor, which is closed for the summer, are burst, and he employs a plumber to repair them and stop the leak, he can call upon the owner of the house to pay him the cost of the work.