Essentials of a Valid Contract

What are the essentials of a valid Contract under Indian contract act 1872?

In this article, I have explained about the essentials of a valid contract with respect to Indian contract act. There are different essential elements of a valid contract which is discussed below.

Following essentials are stipulated thus in Section 10 All, agreements are Contracts, if they are made:-

  1. By the free consent of Parties competent to Contract
  2. For a Lawful consideration and Lawful object
  3. Are not expressly declared to be void
  4. They should also fulfill legal formalities

According to English Law there is a further requirement namely an “intention to create legal obligation”. The principle is followed in India also. This may be added as the sixth requisite element.

Essentials of valid Contract under Indian Contract Act 1872

All agreements are not Contract. The Law of Contract is the Law of those agreements which create legal obligations and not simply moral or social ones. An agreement; which creates legal obligations in order to be valid and binding must possess certain basic essentials. These essentials are the essential elements of the Contract.

Following are these essentials:-

There are 7 elements of a valid contract under Indian Contract Act 1872 :-

Proposal and acceptance -There must be minimum two parties for the purpose of creating a Contract. Moreover there must be an offer by one party and acceptance by the other patty. Such an offer and acceptance must be legal which means that they should conform to the rules laid down in the Contract Act regarding the valid offer and valid acceptance.

Legal Relationship – The parties to the agreement must intend to create legal relations between them. Mere social or domestic agreements are not Contract because they are not intended to be binding viz., an agreement to have a cup of tea at a friend’s house is simply a social agreement.

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Lawful consideration -This is one of the important “essentials of a valid contract”. The agreement to be enforceable by Law must be supported by consideration. An Agreement to do something for others, for nothing, is usually not enforceable. A bare promise without intention to affect legal relations between the parties is of no legal consequence ex nudo pacto non obitr actio. Consideration is taken to be the necessary evidence required by law of the intention of the parties to affect their legal position. Consideration means “something in return”. Thus the agreement is legally enforceable when one gets “something in return” thus the agreement is legally enforceable when one gets something in return of something “Quid pro Qua”.

Capacity of parties -The parties must be competent to Contract i.e., capable of entering into a valid Contract. Every person is competent to Contract if he

  •  is of the age of majority
  •  is of sound mind
  • is not disqualified from contracting by any Law to which he is subject, want of capacity may thus arise from minority, lunacy, idiocy, drunkenness etc. If any of the party to a Contract suffers from such a disability the agreement is not enforceable excepting perhaps in some special cases.

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Free consent –Two or more parties are said to consent when they agree upon the same sense. In addition an agreement in ‘ order to be enforceable must be based on the free consent of all the parties. Consent is said to be free when it is not caused by

Valid and Invalid Contract Statistics
  • Coercion
  •  Undue influence
  •  Fraud
  • Misrepresentation
  •  Mistake

Lawful object -The object of the agreement must be lawful. In other words. It must not be

  •   illegal
  • immoral
  • against policy. ‘Every agreement of which the object is unlawful is void

Certainty of terms -The terms of the Agreement must be definite and certain and must not be vague. Hence the Court will not enforce a Contract, the terms of which are uncertain, vague or illusory. More over, there can never be an agreement to agree in future since there cannot be a Contract to make a contract.

A term in a Contract which destroys the Contract itself is void.

Possibility of performance -The agreement must capable of being performed. An agreement to do an act impossible in itself is void, i.e., if A promises to give Rs. 1000 to B, if B can prove that two parallel lines can meet each other such an agreement is void.

Void Agreements – The agreement must not have been expressly declared to be void. Following agreements are expressly declared to be void under the Indian Contract Act:

  • Agreement in restraint to maniage (Section 26).
  • Agreement in restraint of trade (Section 27).
  • Agreement in restraint of legal proceedings (Section 28). 4) Agreement having uncertain meaning (Section 29).
  • Wagering Agreement (Section 30).
what is valid contract with example

Legal formalities – The agreement may either be oral or in writing. But there are certain agreements which are required to be in writing e.g., Lease, Gift, Sale, Mortgage of immovable property, negotiable instruments, certain matters under the Companies Act, 1965. Such agreements must be in writing attested and registered, if so required by Law. Registration of Agreements or deeds is thus compulsory in case of documents falling within the scope of Section 17 of the Indian Registration Act, 1908. If the agreement does not comply with these legal formalities it cannot be enforced by law.

Example of a Valid Contract –

Union of India vs. Madalala, A centered into an agreement with B, a Railway Company to supply certain articles during certain period of time. In this Contract, there was note of cancelling the Contract without assigning any reason, at anytime, B did terminate the Contract during such period. A thereupon field a suit for the recovery of the damages from B resulting from such breach. His claim was upheld on the ground that once the offer is accepted any term in the Contract which destroys the Contract itself is void.

Question related to valid Contract.

what is valid contract with example?

An agreement is enforceable at law when it fulfills certain conditions laid down in Section 10 of the Contract Act. According to this section: All agreements are valid contracts if they are made by the free consent of parties competent to Contract for a Lawful consideration and with a Lawful object, and are not hereby expressly declared to be void.

can all agreement becomes valid contract?

All agreements are not Contract. The Law of Contract is the Law of those agreements which create legal obligations and not simply moral or social ones. An agreement; which creates legal obligations in order to be valid and binding must possess certain basic essentials.

BIBLIOGRAPHY

United Law Series by Dr. S.V. Srikanth

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