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There are several elements needed to constitute a valid contract.

One of the elements

is free consent. If there is no free consent given by one of the parties, the contract
may become voidable. Explain the meaning of free consent and voidable contract
under the Contract Acts 1950. Discuss in detail THREE factors which can cause a
contract to be voidable.
According to Section 2(h) of the Contracts Act 1950, contract is an agreement
enforceable by law. In other words, a contract is an agreement that binds the parties who
enter into it and it can be enforced against one another.
The purpose of a contract is to establish the agreement that the parties have made and to
fix their rights and duties in with that agreement. The courts must enforce a valid contract
as it is made, unless there are grounds that bar its enforcement.
In Malaysia, contract law is basically governed and enforced by the Contract Act 1950.
The remedy of specific performance presupposes the existence of a valid contract
between the parties to the controversy. The terms of the contract must be definite and
certain. This is significant because equity cannot be expected to enforce either an invalid
contract or one that is so vague in its terms that equity cannot determine exactly what it
must order each party to perform.
It would be unjust for a court to compel the performance of a contract according to
ambiguous terms interpreted by the court, since the court might erroneously order what
the parties never intended or contemplated. The law of contract, as a general rule,
performance of a contract must be exact and precise and should be accordance to with
what the parties had promised. Section 38(1) of the Contracts Act 1950 provides that the
parties to a contract must either perform or offer to perform their respective promises,
unless such performance has been dispensed with by any law.
Statutes prescribe and restrict the terms of a contract where the general public is affected.
The terms of an insurance contract that protect a common carrier are controlled by stature
in order to safeguard the public by guaranteeing that there will be financial resources
available in the event of and accident.
The courts may not create a contract for the parties. When the parties have no express or
implied agreement on the essential terms of a contract, there is no contract. Courts are
only empowered to enforce contracts, not to write them for the parties. A contract in order
to be enforceable must be valid. The function of the court is the enforce agreements only
if they exist and not to create them through the imposition of such terms as the court
considers reasonable.

It is the policy of the law to encourage the formation of contracts between competent
parties for lawful objectives. As a general rule, contracts by competent persons equitably
made are valid and enforceable. Parties to a contract are bound by the terms to which
they have agreed, usually even if the contact appears to be improvident or a bad bargain,
as long as it did not result from fraud or under influence.
The binding force of a contract is based on the fact that it evinces a meeting of minds of
two parties in good faith. A contract once formed, does not contemplate a right of a party
to reject it. Contracts that were mutually entered into between parties with the capacity to
contract are binding obligations and may not be set aside due to the caprice of one party
or the other unless state provides to the contrary.
Contracts can be either void or voidable. A void contract imposes no legal rights or
obligation upon the parties and is not enforceable by a court. It is in effect no contract at
A void contract is a contract which is not enforceable in the court of law. At the time of
formation of the contract, the contract is valid as it fulfills all the necessary conditions
required to constitute a valid contract, i.e. free consent, capacity, consideration, a lawful
object, etc. But due to a subsequent change in any law or impossibility of an act, which
are beyond the imagination and control of the parties to the contract, the contract cannot
be performed, and hence, it becomes void. Further, no party cannot sue the other party for
the non-performance of the contract.
The contract becomes void due to the change in any law or any government policy. Along
with that, the contracts which are opposed to public policy also ceases its enforceability.
Contracts with incompetent persons are also declared void like minor, persons of unsound
mind, alien enemy or convict. Example of void contract is Nash Vs Inman. In this case A
is a tailor and B is a minor and under graduate. In England Court is necessary to graduate
and luxury to undergraduate. By means of that Contract B gets 11 coats from A on Credit

basis. Thereafter B gets failed in the graduation examination and doesn't pay amount to it.
A file was suit. Court decides that coat is not necessary and hence the Contract is Void.
Voidable Contract is the contract which can be enforceable only at the option of one of
the two parties to the contract. In this type of contract, one party is legally authorized to
make a decision to perform or not to perform his part. The aggrieved party is independent
to choose the action. The right may arise because the consent of the concerned party is
influenced by coercion, undue influence, fraud or misrepresentation.
The contract becomes valid until the aggrieved party does not cancel it. Moreover, the
party aggrieved party has the right to claim damages from the other party.
When a contract is voidable, a party to the contract is able to cancel or revoke the
Contracts can become voidable due to:
Mistake. A contract can be canceled on the grounds of a mutual mistake of fact. But
remember, failure to read the contract doesn't make a contract voidable.
Lack of capacity. A person must have the legal ability to form a contract in the first place.
A person who is unable, due to intoxication or mental impairment, to understand what she
is doing when she signs a contract may lack capacity to enter into a contract.
Coercion, undue influence, misrepresentation and fraud. Getting consent for a contract in
a number of shady ways can make a contract voidable. Contracts entered into based on
coercion, threats, false statements, or improper persuasion can be voided by the party
who was the victim of the unfairness.
Minor. Falling under the umbrella of capacity, a contract entered into by a minor typically
may be voided by the minor or by his or her guardian. After reaching the age of majority
(18 in most states), however, if he or she doesn't cancel the contract within a reasonable
period of time, the contract can become binding and enforceable.

In order to form a contract agreement that is enforceable by law, the following six
elements must be fulfilled:

The following are the 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.
2. Intention to Create Legal Relationship. 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)
3.Lawful Consideration. Consideration has been defined in various ways.
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.
4. Capacity of parties. The parties to an agreement must be competent t
contract. If either of the parties does not have the capacity to contract, the
contract is not valid.
According the following persons are incompetent to contract.
(a) Miners,
(b) Persons of unsound mind, and
(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

(1) Coercion, or
(2) Undue influence, or
(3) Fraud, or
(4) Mis-representation, or
(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
(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.
7. Certainity of Meaning. According to Section 29,"Agreement the
meaning of which is not Certain or capable of being made certain are
8. Possibility of Performance. If the act is impossible in itself, physically
or legally, if cannot be enforced at law. For example, Mr. A agrees with B to
discover treasure by magic. Such Agreements is not enforceable.
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.
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
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

For a contract to be valid, it is necessary that the parties

provide free consent to be terms. If the contract were not
with free consent, the contract would be voidable by the
other party whose consent was not taken or was not free.
Consent is said to be free only when it is not entered by
means of


Undue Influence


Misrepresentation and


Coercion (Section 15 and Section 72)

Coercion refers to any of the following:-

1). Threatening to commit any act prohibited by the Indian

Penal Code
2). Detaining not as per law or even threatening to detain
any property, with mere the intention of constraining an
individual to enter into an agreement.
Case study: Ranganayaamma vs. Alwar Setty
A girl aged 13 lost her husband and she was forced to adopt a
boy by her in laws. They denied the dead body from being
removed for cremation until her she agrees to adopt a boy.
The adoption of the boy was kept aside by the court as the
consent for the same was obtained by way of Coercion.
Undue Influence (Section 16)
When there is a special relationship between the parties, in
such a way, that one person has the ability to influence the
other by persuading them and is able to dominate his/her
will to get undue advantage, and then he/she is said to have
exercised undue influence. Normally Undue influence
happens when an individual has authority/power over the
other, is in a fiduciary relationship or is a caregiver for a
person who is handicapped. Undue influence is also called
moral coercion.

Fraud (Section 17 and 19)

Fraud is a misrepresentation done intentionally to deceive a
person and force him/her to enter into a contract. The
following states where Fraud may happen:

Any false advice given by one party to another

who does not believe it to be true.

Hiding of a fact by one party although having

knowledge about the same.

False Promises made with no intention to abide

by it.

Any deceitful act.

Any act which is not as per law or any omission,

which is specifically stated to be fraudulent as per

As there is active concealment of facts, the contract is

voidable even though the party has the ways and means to
identify the truth with ordinary diligence.
Case Study:-Peek vs. Gurney
The outline of the organization did not refer to the presence
of any document revealing liabilities. This brought about the
organization seeming, by all accounts, to be doing great. In
the event that the report was uncovered, it would have

changed the impression about the organization. The court

decided that the non-divulgence added up to
misrepresentation and any individual who bought shares on
the confidence of this plan could void the contract.
Misrepresentation (Section18-19)
Misrepresentation can be stated as common simple
misrepresentation while fraud is known as fraudulent
misrepresentation. However, the falsity or inaccuracy is not
due to any desire or defrauds the other party. Such happens
because of a statement, which is made innocently. The party
making such statement believes that to be true. Such can be
avoided by the party subject to such misrepresentation.
Mistake (Sections 20-21)
Mistake may be characterized as a wrong conviction from the
parties to the contract concerning something relating to the
contract. A mistake of fact is pardoned yet a mistake of law is