Essential Of Valid Contract

“All Contracts are agreements but all agreements are not contracts”

with this statement explain essential factors of valid contract

 when offer is accepted becomes promise, promise with consideration

becomes

agreement, agreement added with enforceability becomes contract

Offer + Acceptance = Promise

Promise + consideration = Agreement

Agreement + Enforceability = Contract

 An agreement, to be enforceable by law, must possess the essential

elements of a

valid contract as contained in section 10 of the Indian Contract Act.

1. Offer and Acceptance. 6. Lawful Object

2. Intention to Create Legal
Relationship
3. Lawful Consideration
4. Competent of parties
5. Free Consent
1.offer and acceptance
7. Certainty of Terms
8. Possibility of Performance.
9. Not Declared to be void or Illegal
10. Legal Formalities

 In order to create a valid contract, there must be two party, must be a

'lawful offer' by one & 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

 Example: :-The offer must be definite, may be conditional and duly

communicated to

the other party. Similarly, the acceptance must be unconditional and

communicated

to the offeree in the prescribed mode, and so on.

2.Intention to create legal relations

 There must be an intentions among the parties that agreement

should be attached by legal

consequences and create legal obligations.

 “Contracts must not be the sports of an idle hour, mere matters of

pleasantry and badinage,

never intended by the parties to have any serious effect whatsoever”

 There can be no contract without such intention.

3.Lawful Consideration

 The third essential elements of valid contract are the presence of

consideration.

 Consideration has been defined as the price paid by one party for the
promise of other.

 Example- A agrees to sell his books to B for Rs 100, B‟s promise to pay
Rs 100 is the
consideration for A‟s promise to sell his books and A‟s promise to sell
the book is the consideration for B‟s promise to Pay Rs 100.

4. Capacity to Parties

 The parties to an agreement must be competent to contract;

otherwise it cannot be enforced by court of law.

 Section 11 of the Indian contract act specifies that every person is

competent to contract provided;

i. A person who is the age of majority.

ii. A person of sound mind

iii. A person who is not disqualify from contracting by any law to which
he is subject.

 Example- A minor borrowed 2000 from B. Contract with minor is not

a valid contract. So, B cannot recover his money from minor.

5. Free and Genuine Consent

 Free consent of all parties to an agreement is another essential

element of valid contract.

 Consent means that the parties must have agreed upon the same
thing in the same sense.

 There is absence of „Free consent‟, if the agreement induced by:

intention of causing any person to enter into agreement”.

6. Lawful Object

 The object of an agreement must be to do some act which is legal.

 The Object is said to be unlawful if-

(a) it is forbidden by law;

(c) it is fraudulent;

Example- X and Y entered into contract for the division of gains among
them acquired by

fraudulent means object is not lawful.

7. Writing and Registration

 According to Indian contract act a contract may be oral or in writing.

But in certain special

cases it lays down that the agreement, to be valid, must be in writing

or/and registered.

 Example- It requires that an agreement to pay time –barred debt

must be in writing and an

agreement to make a gift for natural love and affection must be in

writing and registered (section 25).

8. Certainty of Terms

 Agreement made by the parties must be certain or capable of being

made certain in its

meaning.

 Agreement with uncertain meaning will bring uncertainty in the rights

and obligations
created by it and these rights and obligations cannot be enforced in the
court of law.

 According to Section 29, "Agreement the meaning of which is not

certain or capable of being made certain are void"

 Example:

a. A agree to sell to B a 100 tonne of oil, there is nothing to show what

kind of oil intended, the

9. Possibility of performance

 Another essential feature of a valid contract is that it must be capable

of performance.

 Section 56 lays down that “An agreement to do an act impossible in

itself is void”.

 If act is impossible of performance, physically or legally , it cannot be

enforced by law contract is not valid.

10. Agreement not declared void

 The agreement must note be one, which the law declared to be either
illegal or void.

 A void agreement is one, which is without any legal effects. Illegal

agreement is an agreement expressly or impliedly prohibited by law.

 Example- An agreement of marriage, legal proceedings. etc are void

agreement.

 Agreements mentioned in Section 24 to 30 of the Act have been

expressly declared to be void.