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Essentials of a Valid Contract under Indian Contract Act, 1872

INTRODUCTION

Contracts are legal agreements that can be made either in writing or verbally between two or more parties. They are governed by the law and are binding on all parties involved. The purpose of a contract is to establish trust and loyalty between the parties, while also minimizing the risks of fraud and cheating. It is important to note that contracts are not always money-related, but can also relate to specific performance obligations. Once a contract is made, it creates legal obligations that are governed by law, and if fraud is involved, a party to the contract has the right to make a civil or criminal claim against the other party for breach of contract.

The definition of a contract is provided under section 2(h) of the Indian Contract Act, 1872. In simple terms, a contract is an agreement entered into by two or more parties in writing, which contains certain promises that the parties must perform and follow. When this written agreement becomes enforceable by law, it becomes a contract

DEFINITION OF CONTRACT by FAMOUS AUTHORS AND JURISTS

Salmond- “A contract is an agreement creating and defining obligation between two or more persons/parties”.

Sir Fredrick Pollock- “Every agreement and promise enforceable by law is a contract”.

Anson- “The law of contract is that branch of law which determines the circumstances in which a promise shall be legally binding on the person making it”.

Illustration

A had a contract with B for the purchase of 10 bags of wheat of a specific quality for Rs. 50,000. In this case, B promised to provide A with 10 bags of wheat of that specific quality only, for which A had contracted. And A’s promise was to pay B Rs. 50,000 duly. In this case, both parties are obligated to fulfill their respective promises and perform something for the other, thus it is a case of reciprocal promise.

CONTRACTS= Agreement + Enforceability

AGREEMENT- The initial step in creating a valid contract is the establishment of an agreement. This agreement is formed when one party makes a promise or set of promises to another in exchange for consideration. Upon acceptance of the proposal by the recipient, the proposal is transformed into a promise. It is essential to note that the agreement must exist between two parties, namely the offeror, who makes the offer, and the acceptor, who accepts it.

ENFORCEABILITY OF AGREEMENT– The way of agreement to become a mature contract must create legal obligations as per the provision of the contract law that is the duty enforceable by law. If there is no enforceability of the contract then the parties have no right to claim any right nor they can go to court to seek any remedy.

Essentials of a Valid Contract

1. OFFER AND ACCEPTANCE

All offers must be valid and once accepted, it binds both the parties into a valid agreement. The offeree will become the acceptor once the proposal is accepted. The adjective lawful suggests that the offer and acceptance must satisfy the recruitments of the contracts in relations

CASE LAW- Lalman Shukla Vs Gauri Dutta

It was held by the court that “Mere knowledge of an offer does not imply acceptance by the offeree”

LEGAL RELATIONSHIP

Parties to the contract must maintain a legal relationship. It means that parties to the contract must maintain a transparent and truthful dignity while involved in the contract. If any one of them fails to fulfill his/ her part of the promise made, he/she will be liable for the failure of the contract and also liable for penal offenses.

CASE LAW- Balfour Vs Balfour

It was held by the court that ” If the agreement is domestic in nature then that agreement is not enforceable by law.”

2. LAWFUL CONSIDERATION

Consideration means that something is in return. It is essential for the validity of the contract. A promise to do or perform something or to provide something without expecting anything in return will not be enforceable at law and therefore will not be valid. Consideration need not be in cash or kind. A contract without consideration is a wagering contract. A consideration is important and must be lawful.

SEC-25 of the act states that an agreement without consideration is void.

3. COMPETENCY OF THE PARTIES

The parties of an agreement should be capable of contracting, it means they should be capable of entering into the contract. According to the contract act, every person except the following is competent to enter into a contract-

  • MINOR
  • UNSOUND MIND PERSON
  • PERSON DISQUALIFIED FROM ENTERING INTO CONTRACT.

CASE LAW- Mohri Bibi Vs Dharmodas Ghose

It was held by the court that an “agreement with a minor is void ab initio.”

4. FREE CONSENT 

The essential of a valid contract is the consent of the parties, which should be free. As per the contract act two or more parties are said to consent when they agree upon the same things and rules in the same sense. The consent  is considered free when any of the following things do not induce it-

  • Coercion
  • Misrepresentation
  • Fraud
  • Undue influence
  • Mistake

5. WRITING AND REGISTRATION

The agreements may be oral or in writing. When the agreement is in writing it should comply with all legal formalities as to the attestation and registration. If the agreement does not abide by the requisite legal formalities the law cannot enforce it.

6. LAWFUL OBJECTS

According to the contract act, an agreement may become a valid contract only, if it is for a lawful consideration and lawful consideration and lawful objects. There are a few things that are unlawful as per the Contracts Act:

  • If it is forbidden by law
  • If it is fraudulent
  • If it is against the provision of the act
  • If it is immortal or against the public policies

CONCLUSIONS

A contract is a legal agreement that establishes the rights and obligations of two or more parties. It is a formal and binding agreement that outlines the terms and conditions that the parties have agreed upon regarding a particular matter. The parties involved in a contract can include individuals, companies, or organizations.

There are three essential elements of a contract: agreement, consideration, and enforceability. The agreement is the mutual understanding between the parties regarding the terms of the contract. Consideration is the exchange of something of value, such as money, goods, or services, between the parties. Enforceability is the ability to enforce the terms of the contract through legal remedies if one party breaches the agreement.

If one party violates the terms of the contract, the other party has a legal right to take action against the guilty party. The aggrieved party can seek legal remedies such as damages, specific performance, or termination of the contract.

It is important to note that not all agreements are contracts. An agreement becomes a contract only if it fulfills the essential elements of a contract, i.e., agreement, consideration, and enforceability.

Also Read: 
Rights of undertrial prisoners in India
How To Send A Legal Notice In India

Shreya Sharma
Shreya Sharma
As a passionate legal student , I am thrilled to embark on a promising internship in the realm of law articles. Through my writing, I am determined to unravel the intricate complexities of the legal world and make a meaningful impact. This is my opportunity to combine theory and practice, and I am ready to take on the challenge with enthusiasm and dedication.
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