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An agreement between two or more parties, especially one that is written and enforceable by law.

An agreement between at least two persons which is enforceable at law.

At common law, a contract requires three elements:

1 .A meeting of the minds (also known as consensus ad idem or an offer coupled with an acceptance) on
fundamental or substantial terms;

2. In common law jurisdictions, that elusive concept of consideration (something must flow from each
party); and

3.Compliance with common law or statute law such as the subject matter of the contract must not be
illegal and the parties must be "competent to contract" (corporations or adults but not the mentally


According to Section 10 "All agreements are contracts if they are made by the free consent of the
parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby
expressly declared to be void" As per the above section, a contract must have the following

1. Intention to create legal relationship.

2. Lawful object

3. Agreement not expressly declared void

4. Proper offer and it s acceptance

5. Free Consent

6. Capacity of parties to contract

7. Certainty of meaning.

8. Possibility of performance.
9. Lawful consideration

10. Legal formalities

Intention to create legal relationship: The parties entering into a contract must have an intention
to create a legal relationship. If there is no intention to create a legal relationship, that agreement
cannot be treated as a valid contract. Generally there is no intention to create a legal relationship in
social and domestic agreements. Invitation for lunch does not create a legal relationship. Certain
agreements and obligation between father and daughter, mother and son and husband and wife
does not create a legal relationship. An agreement wherein it is clearly mentioned that "This
agreement is not intended to create formal or legal agreement and shall not be subject to legal
jurisdiction in the law of courts." cannot be treated as a contract and not valid.

Lawful Object: The objective of the agreement must be lawful. Any act prohibited by law will not be
valid and such agreements cannot be treated as a valid contract. A rents out his house for the
business of prostitution or for making bomb, the acts performing there are unlawful. Hence such
agreement cannot be treated as a valid contract. Therefore the consideration as well as the object of
the agreement should be lawful.

Agreement not expressly declared void: Section 24 to 30 specify certain types of agreement
which have been expressly declared void. For example Restraint of marriage which has been
expressly declared void under Section 26. If John promises to pay $50 to Mary if she does not marry
throughout her life and Mary promise not to marry at all. But this agreement cannot be treated as a
valid contract owing to the fact that, under section 26 restraint of marriage expressly declared void.
Some of the agreement which have been expressly declared void are agreement in restraint of legal
proceedings, agreement in restraint of trade, agreement in restraint of marriage and agreement by
way of wager.

Proper offer and it s acceptance: To create a valid contract, there must be two or more parties.
One who makes the offer and the other who accepts the offer. One person cannot make an offer and
accept it. There must be at least two persons. Also the offer must be clear and properly
communicated to the other party. Similarly acceptance must be communicated to the other party and
the proper and unconditional acceptance must be communicated to the offerer. Proper offer and
proper acceptance should be there to treat the agreement as a contract which is enforceable by law.

Free Consent: According to section 14, consent is said to be free when it is not caused by (i)
coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by
any of the above four reason, at the option of the aggrieved party it could be treated as a void
contract. If the agreement induced by mutual mistake the agreement would stand void or canceled.
An agreement can be treated as a valid contract when the consent of the parties are free and not
under any undue influence, fear or pressure etc. The consent of the parties must be genuine and
free consent.

Capacity of parties to contract: Parties entering into an agreement must be competent and
capable of entering into a contract. If "A" agrees to sell a Government property to B and B agrees to
buy that property, it could not treated as a valid agreement as A is not authorized or owner of the
property. If any of the party is not competent or capable of entering into the agreement, that
agreement cannot be treated as a valid contract. According to Section 11 of the Act which says that
every person is competent to contract who is of the age of majority according to the law to which he
is subject and who is of sound mind, and is not disqualified from contracting by any law to which he
is subject. So it is clear that the party must be of sound mind and of age to enter into a valid
agreement which can be treated as a valid contract.

Certainty of meaning: Wording of the agreement must be clear and not uncertain or vague.
Suppose John agrees to sell 500 tones of oil to Mathew. But, what kind of oil is not mentioned
clearly. So on the ground of uncertainty, this agreement stands void. If the meaning of the
agreement can be made certain by the circumstances, it could be treated as a valid contract. For
example, if John and Mathew are sole trader of coconut oil, the meaning of the agreement can be
made certain by the circumstance and in that case, the agreement can be treated as a valid
contract. According to Section 29 of the Contract Act says that Agreements, the meaning of which is
not certain or capable of being made certain, are void.

Possibility of performance: As per section 56, if the act is impossible of performance, physically or
legally, the agreement cannot be enforced by law. There must be possibility of performance of the
agreement. Impossible agreements like one claims to run at a speed of 1000km/hour or Jump to a
height of 100feet etc. would not create a valid agreement. All such acts which are impossible of
performance would not create a valid contract and cannot treated as a valid contract. In essence,
there must be possibility of performance must be there to create a valid contract.

Lawful consideration: An agreement must be supported by a consideration of something in return.

That is, the agreement must be supported by some type of service or goods in return of money or
goods. However, it is not necessary the price should be always in terms of money. It could be a
service or another goods. Suppose X agrees to buy books from Y for $50. Here the consideration of
X is books and the consideration of Y is $50. It can be a promise to act (doing something) or
forbearance (not doing something). The consideration may be present, future or can be past. But the
consideration must be real. For example If John agrees to sell his car of $ 50000 to Peter for
$20000. This is a valid contract if John agrees to sell his car not under any influence or force. It can
be valid only if the consideration of John is free. An agreement is valid only when the acts are legal.
Illegal works like killing another for money, or immoral works or illegal acts are cannot be treated as
a valid agreement. So, illegal works will not come under the contract act.

Legal formalities: The contract act does not insist that the agreement must be in writing, it could be
oral. But, in some cases the law strictly insist that the agreement must be in writing like agreement to
sell immovable property must be in writing and should be registered under the Transfer of Property
Act, 1882. These agreement are valid only when they fulfill the formalities like writing, registration,
signing by the both the parties are completed. If these legal formalities are not completed, it cannot
be treated as a valid contract.

Most important essentials of a valid contract are mentioned above. These elements should be
present in a contract to make it a valid contract. If any one of them is missing we cannot treat that
agreement as a valid contract.


1. According to Enforceability:

Valid Contracts

he 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

Void Contracts
A void contract implies that the involved parties are not liable to any legal obligations or
rights, meaning that the parties are not legally bound with reference to that contract. In
fact, a void contract means a contract has ceased to exist and that there is no contract
existing between the two parties.

Voidable Contracts
A voidable contract, on the other hand, is an agreement between any two or more
parties, that has a legal binding. A voidable contract can be treated as never been
legally bound on a party that has been a victim of fraudulent execution or if that party
was suffering from any legal disability. Also, a contract is not void unless and until any of
the involved parties, choose to treat it as a void contract by confronting its

2. According to Formation

Quasi Contracts

A quasi contract is the existence of a contract which is not legitimately done but the
terms are accepted and followed as if there is a legitimate contract. Many of the casual
jobs are quasi contracts as such though it is not there it is apparently present and
accepted by the parties

Express Contracts
In this type of contract, the parties to the contract state the terms and conditions either
by word of mouth or in writing, at the time of forming the contract. A definite written or
oral proposal of the contract is accepted by an offeree in a way that explicitly defines
legal consent to the terms of the contract.

Implied Contracts
Contracts implied in fact and contracts implied in law are both a part of implied contracts.
But a real implied contract consists of certain obligations that arise from a mutual
agreement and intention of promise, which is not expressed verbally. An implied contract
cannot be labelled as implied in law because such a contract lacks the requirements of a
true contract. The term "Quasi Contract", is however, a more specific identification of
contracts implied in law. Implied contracts depend on the reason behind their existence.
Thus, for an implied contract to develop, there must be some transaction, act or conduct
of a party in order for them to be legally bound. A contract will not be implied if there are
any chances of harm or inequity. If there is no clarity of communication, implication and
understanding between the two parties, the court will not conclude any contractual
relationship between the two parties. If the parties continue to follow their contractual
terms, even after the contract has ceased to exist, an assumption arises that the two
parties have mutually agreed to a new contract that has same provisions as the old
contract and a new implied contract is formed.

3. According to Performance:

Executed Contracts
An executed contract is termed as an agreement in which no other transaction is left out
to be executed by either party. This definition could be incorrect to a certain extent, since
completion of work will mean that the contract has ended. But in case of executed
contracts, there exists some act/transaction or an obligation that has to be performed at
some point of time in the future according to the contractual terms.
Bilateral Contracts
If two entities exchange a mutual and reciprocal promise that implicates the execution of
an act, an obligation or a transaction or forbearance from execution of an act or an
obligation, with respect to every party involved in the contract, is termed as bilateral
contract in the language of law. It is also called a two-sided contract because of the two-
way promises made by parties involved in the contract.

Unilateral Contracts
A unilateral contract is a promise made by only one party. The offerer promises to
execute a certain act or an obligation if the offeree agrees on performing a requested act
that is understood as a legally enforceable contract. It just requires an acceptance from
the other party to get the contract executed. Thus, this is a one-sided contract since only
the offerer is bound to the court of law. One important point of this type of contract is
that, the offeree cannot be sued for refraining, abandoning or even failing to execute his
act, since he does not promise anything.

Contingent Contracts

A contingent contract is a contract or do or not to do something, if some event, collateral to such

contract, does or does not happen (Sec 31)

A contract may be unconditional or absolute on the one hand and conditional or contingent on the
other. The absolute or unconditional contract is one without any reservations or conditions and is
to be performed under any event. On the other hand, conditional or contingent contract is one in
which a promise is conditional and the contract shall be performed only on the happening or not
happening of some future uncertain event. The event must be collateral to the contract. The
condition may be precedent or subsequent.

A collateral event is defined as one which is neither a performance directly promised as part of
the contract, nor the whole of the consideration for a promise. The event, therefore independent
of the contract and does not form part of consideration to it.
Executary Contracts

An executory contract is a contract under which one or more parties has not yet performed. For
example: Abel orally has agreed to buy Baker's land, and Baker's attorney has drafted a contract.
At this stage it is executory because neither Abel nor Baker has signed it.

In bankruptcy law, an executory contract is a contract between a debtor and another party under
which both sides still have important performance remaining. Examples of executory contracts
are real estate leases, equipment leases, development contracts and licenses to intellectual