Essential Elements of a Valid Contract
ESSENTIAL
ELEMENTS
OF
A
VALID
CONTRACT
By
:-
SHIKHA JOSHI
Assistant
Professor
Durga Mahavidhyalaya Raipur
According
to
sec
2(h)
of
Indian
Contract
Act
1872
the
Contract
is
an
agreement
enforceable
at
law.
An
agreement,
to
be
enforceable
at
law,
must
posses
the
essential
elements
of
a
valid
contract
as
contained
in
section
10
of
the
Indian
Contract
Act
1872.
Only
that
agreements
which
are
enforceable
by
law
are
contracts.
All
Contracts
are
agreements
but
all
agreements
are
not
contracts.
AGREEMENT
=OFFER+ACCEPTANCE
CONTRACT
=
AGREEMENT
+
ENFORCEABILITY
AT
LAW
.
ESSENTIAL
ELEMENTS
OF
A
VALID
CONTRACT
1.
OFFER
AND
ACCEPTANCE
.
In
order
to
create
a
valid
contract,
there
must
be
a
'lawful
offer'
by
one
party
and
'lawful
acceptance'
of
the
same
by
the
other
party.
Section
2
(a)
of
the
Contract
Act
defines
Offer
as
–
‘
when
one
person
signifies
to
another
his
willingness
to
do
or
to
abstain
from
doing
anything,
with
a
view
to
obtaining
the
assent
of
that
other
to
such
act
or
abstinence,
he
is
said
to
make
an
offer'.
Section
2
(b)
of
the
Contract
Act
states
that,
‘
when
the
person
to
whom
the
offer
is
made
signifies
his
assent
there
to,
the
offer
is
said
to
be
accepted.
2
INTENTION
TO
CREATE
LEGAL
RELATIONSHIP.
I
n
c
a
s
e
,
t
h
e
r
e
i
s
n
o
s
u
c
h
i
n
t
e
n
t
i
o
n
o
n
t
h
e
p
a
r
t
o
f
p
a
r
t
i
e
s
,
t
h
e
r
e
i
s
n
o
c
o
n
t
r
a
c
t
.
A
g
r
e
e
m
e
n
t
s
o
f
s
o
c
i
a
l
o
r
d
o
m
e
s
t
i
c
n
a
t
u
r
e
d
o
n
o
t
c
o
n
t
e
m
p
l
a
t
e
l
e
g
a
l
r
e
l
a
t
i
o
n
s
.
C
a
s
e
:
-
B
a
l
f
o
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r
v
s
.
B
a
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(
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1
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)
M
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3
.
L
A
W
F
U
L
C
O
N
S
I
D
E
R
A
T
I
O
N
.
At
the
desire
of
promisor,
promisee
or
any
other
person
has
done
or
abstain
from
doing
or
does
abstain
from
doing
such
act
or
promises
is
known
as
consideration.
According
to
Blackstone
"Consideration
is
recompense
given
by
the
party
contracting
to
another."
In
other
words
of
Pollock,
"Consideration
is
the
price
for
which
the
promise
of
the
another
is
brought."
Consideration
is
known
as
“quid
pro-
quo”
or
something
in
return.
It
may
be
cash,
kind,
act
or
abstinence
and
may
be
in
past,
present
or
future.
It
should
not
be
unlawful,
immoral
and
against
the
public
policy.
4.
COMPETENCY
OF
THE
PARTIES./CAPACITY
TO
CONTRACT
.
T
h
e
p
a
r
t
i
e
s
t
o
a
n
a
g
r
e
e
m
e
n
t
m
u
s
t
b
e
c
o
m
p
e
t
e
n
t
.
I
f
e
i
t
h
e
r
o
f
t
h
e
p
a
r
t
i
e
s
d
o
e
s
n
o
t
h
a
v
e
t
h
e
a
b
i
l
i
t
y
t
o
c
o
n
t
r
a
c
t
,
t
h
e
c
o
n
t
r
a
c
t
i
s
n
o
t
v
a
l
i
d
.
T
h
e
f
o
l
l
o
w
i
n
g
p
e
r
s
o
n
s
a
r
e
i
n
c
o
m
p
e
t
e
n
t
t
o
c
o
n
t
r
a
c
t
.
(
a
)
M
i
n
o
r
:
A
p
e
r
s
o
n
l
e
s
s
t
h
a
n
a
g
e
o
f
1
8
i
s
m
i
n
o
r
.
C
a
s
e
-
M
o
h
r
i
B
i
b
i
v
s
D
a
m
o
d
a
r
G
h
o
s
h
1
9
0
3
(
b
)
U
n
s
o
u
n
d
m
i
n
d
p
e
r
s
o
n
:
A
n
y
p
e
r
s
o
n
w
h
o
i
s
u
n
a
b
l
e
t
o
u
n
d
e
r
s
t
a
n
d
t
h
e
t
e
r
m
a
n
d
c
o
n
d
i
t
i
o
n
o
f
c
o
n
t
r
a
c
t
a
t
t
h
e
t
i
m
e
o
f
i
t
s
f
o
r
m
a
t
i
o
n
i
s
u
n
s
o
u
n
d
m
i
n
d
.
(
c
)
p
e
r
s
o
n
s
d
i
s
q
u
a
l
i
f
i
e
d
b
y
l
a
w
t
o
w
h
i
c
h
t
h
e
y
a
r
e
s
u
b
j
e
c
t
.
5
.
F
R
E
E
C
O
N
S
E
N
T
.
“Consent'
means
the
parties
must
have
agreed
upon
the
same
thing
in
the
same
sense.
According
to
Section
14,
Consent
is
said
to
be
free
when
it
is
not
caused
by-
(1)
Coercion
(
C
a
s
e
-
R
a
n
g
n
a
y
k
a
m
m
a
v
s
A
l
w
a
r
S
e
t
t
i
1
8
8
9
.
)
(2)
Undue
Influence
(3)
Fraud
(4)
Mis-
representation
(5)
Mistake.
An
agreement
should
be
made
by
the
free
consent
of
the
parties.
6.
LAWFUL
OBJECT.
The
object
of
an
agreement
must
be
valid.
Object
has
nothing
to
do
with
consideration.
It
means
the
purpose
or
design
of
the
contract.
Thus,
when
one
hires
a
house
for
use
as
a
gambling
house,
the
object
of
the
contract
is
to
run
a
gambling
house.
The
Object
is
said
to
be
unlawful
if-
(a)
it
is
forbidden
by
law;
(b)
it
is
of
such
nature
that
if
permitted
it
would
defeat
the
provision
of
any
law;
(c)
it
is
fraudulent;
(d)
it
involves
an
injury
to
the
person
or
property
of
any
other;
(e)
the
court
regards
it
as
immoral
or
opposed
to
public
policy.
Or
any
agreement
to
distribute
the
money
earned
by
robbery.
7.
CERTAINTY
OF
MEANING.
According
to
Section
29,"Agreement
the
meaning
of
which
is
not
Certain
or
capable
of
being
made
certain
are
void.
“
For
e.g.
:
A
agree
to
sell
to
B
a
100
tones
of
oil,
there
is
nothing
to
show
what
kind
of
oil
intended,
the
agreement
is
void
due
to
the
absence
of
certainty.
But
if
A
is
dealer
of
coconut
oil
only
agree
to
sell
B,100
tones
of
oil,
the
nature
of A
’
s
trade
is
sufficient
to
show
the
kind
of oil,
and
this
will
be
a
valid
contract.
8.
POSSIBILITY
OF
PERFORMANCE
.
Condition
for
a
contract
should
be
capable
for
performance
.If
the
act
is
impossible
in
itself,
physically
or
legally,
if
cannot
be
enforced
at
law.
For
example:
If
A
and
B
makes
an
agreement
that
if
B
encloses
a
space
with
the
help
of
two
straight
lines
then
A
will
pay
him
Rs.
1000
otherwise
B
will
be
liable
for
paying
Rs.
500
to
A.
RESULT:
This
is
an
impossible
work.
Two
straight
lines
can
not
enclose
a
space
,
hence
contract
is not
valid.
9.
NOT
DECLARED
TO
BE
VOID
OR
ILLEGAL
.
The
agreement
though
satisfying
all
the
conditions
for
a
valid
contract
must
not
have
been
expressly
declared
void
by
any
law
in
force
in
the
country.
Agreements
mentioned
in
Section
24
to
30
of
the
Act
have
been
expressly
declared
to
be
void.
For
example
agreements
in
restraint
of
trade,
marriage,
legal
proceedings
etc.
That
is
:
If
A
is
not
willing
to
marry
with
B,
law
can
not
enforce
him/her.
10.
LEGAL
FORMALITIES
.
An
oral
Contract
is
a
perfectly
valid
contract,
expect
in
those
cases
where
writing,
registration
etc.
is
required
by
some
statute.
In
India
writing
is
required
in
cases
of
sale,
mortgage,
lease
and
gift
of
immovable
property,
negotiable
instruments;
memorandum
and
articles
of
association
of
a
company,
etc.
Registration
is
required
in
cases
of
documents
coming
within
the
scope
of
section
17
of
the
Registration
Act
1908.
All
the
elements
mentioned
above
must
be
in
order
to
make
a
valid
contract.
If
any
one
of
them
is
absent
the
agreement
does
not
become
a
contract.
A valid contract requires key elements such as offer and acceptance, intention to create legal relations, lawful consideration, and competency of the parties. An agreement becomes enforceable at law only when it possesses these essential elements. The article discusses these elements along with relevant legal examples.
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Presentation Transcript
ESSENTIAL ELEMENTS OF A VALID CONTRACT By :- SHIKHA JOSHI Assistant Professor Durga Mahavidhyalaya Raipur
According to sec 2(h) of Indian Contract Act 1872 the Contract is an agreement enforceable at law. AGREEMENT =OFFER+ACCEPTANCE CONTRACT = AGREEMENT + ENFORCEABILITY AT LAW. An agreement, to be enforceable at law, must posses the essential elements of a valid contract as contained in section 10 of the Indian Contract Act 1872. Only that agreements which are enforceable by law are contracts. All Contracts are agreements but all agreements are not contracts.
ESSENTIAL CONTRACT ELEMENTS OF A VALID 1. OFFER AND ACCEPTANCE. In order to create a valid contract, there must be a 'lawful offer' by one party and 'lawful acceptance' of the same by the other party. Section 2 (a) of the Contract Act defines Offer as when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make an offer'. Section 2 (b) of the Contract Act states that, when the person to whom the offer is made signifies his assent there to, the offer is said to be accepted.
2 RELATIONSHIP. INTENTION TO CREATE LEGAL In case, there is no such intention on the part of parties, there is no contract. Agreements of social or domestic nature do not contemplate legal relations. Case :- Balfour vs. Balfour(1919) Mr. Balfour and his wife went to England for a vacation, and his wife became ill and needed medical attention. They made an agreement that Mrs. Balfour was to remain behind in England when the husband returned to Ceylon (Sri Lanka) and that Mr. Balfour would pay her 30 a month until she returned. This understanding was made while their relationship was fine; however the relationship later soured. The lower court found that there was sufficient consideration in the consent of Mrs. Balfour and thus found the contract binding, which Mr. Balfour appealed. Arrangements made between husbands and wives are not generally contracts as the parties do not intend to be legally bound by the agreements.
3.LAWFUL CONSIDERATION. At the desire of promisor, promisee or any other person has done or abstain from doing or does abstain from doing such act or promises is known as consideration. According to Blackstone "Consideration is recompense given by the party contracting to another." In other words of Pollock, "Consideration is the price for which the promise of the another is brought." Consideration is known as quid pro- quo or something in return. It may be cash, kind, act or abstinence and may be in past, present or future. It should not be unlawful, immoral and against the public policy.
4. COMPETENCY OF THE PARTIES./CAPACITY TO CONTRACT. The parties to an agreement must be competent. If either of the parties does not have the ability to contract, the contract is not valid. The following persons are incompetent to contract. (a) Minor: A person less than age of 18 is minor. Case-Mohri Bibi vs Damodar Ghosh 1903 (b) Unsound mind person: Any person who is unable to understand the term and condition of contract at the time of its formation is unsound mind. (c) persons disqualified by law to which they are subject.
5. FREE CONSENT. Consent' means the parties must have agreed upon the same thing in the same sense. According to Section 14, Consent is said to be free when it is not caused by- (1) Coercion (Case- Rangnaykamma vs Alwar Setti 1889.) (2) Undue Influence (3) Fraud (4) Mis- representation (5) Mistake. An agreement should be made by the free consent of the parties.
6. LAWFUL OBJECT. The object of an agreement must be valid. Object has nothing to do with consideration. It means the purpose or design of the contract. Thus, when one hires a house for use as a gambling house, the object of the contract is to run a gambling house. The Object is said to be unlawful if- (a) it is forbidden by law; (b) it is of such nature that if permitted it would defeat the provision of any law; (c) it is fraudulent; (d) it involves an injury to the person or property of any other; (e) the court regards it as immoral or opposed to public policy. Or any agreement to distribute the money earned by robbery.
7. CERTAINTY OF MEANING. According to Section 29,"Agreement the meaning of which is not Certain or capable of being made certain are void. For e.g. : A agree to sell to B a 100 tones of oil, there is nothing to show what kind of oil intended, the agreement is void due to the absence of certainty. But if A is dealer of coconut oil only agree to sell B,100 tones of oil, the nature of A s trade is sufficient to show the kind of oil, and this will be a valid contract. 8. POSSIBILITY OF PERFORMANCE. Condition for a contract should be capable for performance .If the act is impossible in itself, physically or legally, if cannot be enforced at law. For example: If A and B makes an agreement that if B encloses a space with the help of two straight lines then A will pay him Rs. 1000 otherwise B will be liable for paying Rs. 500 to A. RESULT: This is an impossible work. Two straight lines can not enclose a space , hence contract is not valid.
9. NOT DECLARED TO BE VOID OR ILLEGAL. The agreement though satisfying all the conditions for a valid contract must not have been expressly declared void by any law in force in the country. Agreements mentioned in Section 24 to 30 of the Act have been expressly declared to be void. For example agreements in restraint of trade, marriage, legal proceedings etc. That is : If A is not willing to marry with B, law can not enforce him/her. 10. LEGAL FORMALITIES. An oral Contract is a perfectly valid contract, expect in those cases where writing, registration etc. is required by some statute. In India writing is required in cases of sale, mortgage, lease and gift of immovable property, negotiable instruments; memorandum and articles of association of a company, etc. Registration is required in cases of documents coming within the scope of section 17 of the Registration Act 1908. All the elements mentioned above must be in order to make a valid contract. If any one of them is absent the agreement does not become a contract.
