WHAT IS A CONTRACT--In a business, a contract or agreement

plays a significant role in smooth functioning between two

parties. In simple terms, the contract is a written agreement
between two parties, which contains certain obligations and is
enforced by the law. Violation of the contract or law can
attract legal action by any of the parties, including cancellation
of the entire contract. Any individual entering into a written
agreement should be knowledgeable enough with the
essentials of a contract. DEFINITION OF CONTRACT-The Indian
Contract Act 1872 states the term contract is like an
agreement that creates an obligation between parties.
According to the act, the contract is "an agreement
enforceable by law."The act also lists the essentials of a valid
contract directly or through various judgments of the Indian
judiciary.ELEMENTS OF CONTRACT- 1.Offer and Acceptance
• To form a valid contract, there must be two parties to an
agreement.• One party makes the offer and the other party
accepts it and It must be absolute and unconditional.The
acceptance must also be according to the prescribed mode
and must be communicated to the offerer……By and large, the
composed agreement possibly unfurls when the other party
acknowledges the proposal by one party and is unmistakable
in all sense. The deal or understanding should be clear and
complete in all sense. The two players ought to impart to
guarantee there is no pass of the agreement act. Both the deal
and acknowledgment should be "agreement advertisement
idem", which means, the two players should consent

to the same thing. 2.Lawful Consideration--• Consideration

refers to an advantage or benefits moving from one party to
the other.• In simple words, it simply means 'something in
return. The agreement is legally enforceable only when both
the parties fulfill their obligation and give something and get
something in return……Consideration need not necessarily be
in cash/money or kind. Apart from this, it may be an act of
abstinence (abstaining from doing something) or a promise to
do or not to do something.Thought implies the virtue given for
the exhibition of the guarantee. It ought not to be simply
restricted to cash, yet there ought to be some worth to what
exactly has been settled upon. One of the basics of legitimate
thought is that it ought not to be satisfactory, yet should
convey some worth.3.Capacity of the Parties--Both the parties
to an agreement must be capable of entering into a valid
contract.Any person is competent to contract if he/she must
be;(a) The age of majority. (not less than 18 years of age).(b)
Must be sound mind.(c) Not disqualified from contracting to
be any law to which he is subject.4. Free Consent or
Consensus ad idem--• It is essential to form any contract that
there must be free and genuine consent of the parties to the
agreement.• Both the party should be free from any kind of
forces like coercion, undue influence, fraud,
misrepresentation, and mistakes…… To tie, the two players
ought to have a particular goal that can make a lawful
relationship, bringing about an understanding. Arrangements
in friendly or family nature are not agreements since parties

don't plan to construct legitimate connections. 5.Legality of

the object--It is essential that the object of the agreement
must be lawful.. In other words, it means that the object of
the contract must not be,(1) illegal(ii) immoral or(iii) opposed
to public policy…….. If the agreement of contract suffers from
any legal flaw, it would not be enforceable by law.One of the
fundamental components of a substantial deal is that the two
players subject to an agreement should be clear with the aims
of making a legitimate relationship. This additionally implies
that arrangements that are not enforceable by the law like
arrangements between family members are enforceable

in the courtroom. 6. Legal Formality--• In the interest of the

parties that the valid contract should be in writing.• In some
cases, the agreement document in which the contract is
incorporated is to be stamped.• In some other cases, a
contract has to be registered by the authorized person,
court/judiciary……..In this understanding, assuming there is
any vulnerability and the two players are not fit for observing
the correct way, then, at that point, it is considered void. As a
piece of fundamentals of a legitimate thought, the
agreements of the agreement ought to be concrete. Any
agreement, which is unsure in any sense, can be named as
vold. The terms referenced in the arrangement ought to be
equipped for performing explicit musings.7.
Certainty/Possibility of the performance--• agreement of the
contract must be certain and not vague or indefinite.• If it is
vague and it is not possible to ascertain its meaning then it
cannot be enforced.
CONSIDERATION/ ESSENTIALS OF VALID CONSIDERATION--
Consideration means “something return” or “something which
is given and taken.” It refers to something of value given to
someone in return for goods, services or some other promise.
It is the price paid for contract. Section 25 of the Indian
Contract Act, 1872 says that “an agreement made without
consideration is void.” So, Consideration is necessary for the
formation of contract i.e., a valid contract must include
consideration for every party involved DEFINATION-"When, at
the desire of the promisor, the promisee or any other person
has done or abstained from doing or does or abstains from
doing, or promises to do or to abstain from doing, something,
such act or abstinence or promise is called a consideration for
the promise" ELEMENTS 1.At the desire of the promisor:-In
order to constitute valid consideration it must be move at the
desire of the promisor. An act done at the desire of the third
party does not constitute a valid consideration. In Durga
Prasad v. Baldeo, on the order of the town collector, a person
built certain shops in bazaar at his own expense. The shops
came to be occupied by the defendants who, in consideration
of the plaintiff having expended money in the construction,
promised to pay him a commission on articles sold through
their agency in the bazaar. The plaintiff’s action to recover the
commission was rejected. “The only ground for making of the
promise is the expense incurred by the plaintiff in establishing
the market but it is clear that anything done in the way was
not at the desire of the defendants so as to constitute
consideration.” The act was the result not of the promise but
of the collector’s order.2.Promisee or any other person:-The
second most important feature according to the consideration
definition given in the Section 2(d) is that it may pass on to
Promisor from Promisee or any other third person. In the case
of Dutton v. Poole[8], a person had a daughter to marry and
his son promised him that, in return he would pay 1000
pounds to his sister if his father not selling a wood. The father
accordingly forbore but the son(defendant) did not pay. It was
held that due to tie of blood between them the sister could
sue, on the ground that the consideration and promise to the

father may well have extended to her. 3.Consideration may

be past, present, future:-In consideration definition the
words, “has done or abstained from doing; or does or abstains
from doing; or promises to do or to abstain from doing;
indicates that the consideration may be either something
done or not done in the past, or done or not done in the
present or promised to be done or not done in the future. So,
consideration may be past, present and future act…….Past-
When present promise consideration is given before the date
of the promise then, it is called past consideration. A past act
done at request will be good consideration for a subsequent
promise Present- When consideration moves simultaneously
with the promise the, it is known as ‘present’ or ‘executed’
consideration. Example- Tina buys an article from a shop and
immediately pays for the same. In this the consideration
moving from Tina is ‘present’ or ‘executed’
consideration.Future- When consideration for a promise
moves after the contract is formed, it is called as ‘future’ or
‘executory’ consideration. Example- A has promised to sell and
B has promised to pay. Until the goods are actually delivered
to B under the contract, the consideration is executor.
4.Consideration must be lawful:-A consideration which is
against the law or public policy is not valid i.e., it will become
void and unenforceable. Therefore, it is necessary that
consideration should be lawful one. A husband offered reward
to anyone who would rescue his wife dead or alive from a
burning building and a fireman was allowed to receive it as he
accomplished the rescue of her dead body and it was like a
great peril to his health and life, the court held that as a
fireman of the city he was not legally bound to risk his life in
that rescue..5.Consideration must be real:-Consideration
must not be illusionary, it should be factual one i.e., it must be
real and possible. It must have some value in the eyes of the
law. It need not be adequate to the promise for the validity of
an agreement.
FREE CONSENT/ELEMENTS-In the Indian Contract Act, the
definition of Consent is given in Section 13, which states that
“it is when two or more persons agree upon the same thing
and in the same sense”. So the two people must agree to
something in the same sense as well. Let’s say for example A
agrees to sell his car to B. A owns three cars and wants to sell
the Maruti. B thinks he is buying his Honda. Here A and B have
not agreed upon the same thing in the same sense. Hence

there is no consent and subsequently no contract. Elements

of Free Consent- [1].Coercion-Coercion means using force to
compel a person to enter into a contract. So force or threats
are used to obtain the consent of the party under coercion, i.e
it is not free consent. Section 15 of the Act describes coercion
as (a)committing or threatening to commit any act forbidden
by the law in the IPC.(b)unlawfully detaining or threatening to
detain any property with the intention of causing any person
to enter into a contract…For example, A threatens to hurt B if
he does not sell his house to A for 5 lakh rupees. Here even if
B sells the house to A, it will not be a valid contract since B’s
consent was obtained by coercion.Now the effect of coercion
is that it makes the contract voidable. This means the contract
is voidable at the option of the party whose consent was not
free. So the aggravated party will decide whether to perform
the contract or to void the contract. So in the above example,

if B still wishes, the contract can go ahead.. [2] Undue

Influence-Section 16 of the Act contains the definition of
undue influence. It states that when the relations between the
two parties are such that one party is in a position to
dominate the other party, and uses such influence to obtainan
unfair advantage of the other party it will be undue influence.
The section also further describes how the person can abuse
his authority in the following two ways,When a person holds
real or even apparent authority over the other person. Or if he
is in a fiduciary relationship with the other person.He makes a
contract with a person whose mental capacity is affected by
age, illness or distress. The unsoundness of mind can be
temporary or permanent..Say for example-- A sold his gold
watch for only Rs 500/- to his teacher B after his teacher
promised him good grades. Here the consent of A (adult) is

not freely given, he was under the influence of his teacher.

[3]-Fraud--Fraud means deceit by one of the parties, i.e. when
one of the parties deliberately makes false statements. So the
misrepresentation is done with full knowledge that it is not
true, or recklessly without checking for the trueness, this is
said to be fraudulent. It absolutely impairs free consent.So
according to Section 17, a fraud is when a party convinces
another to enter into an agreement by making statements
that are-(A)suggesting a fact that is not true, and he does not
believe it to be true.(B)the active concealment of facts.(C)a
promise made without any intention of performing it.(D)any
other such act fitted to deceive.example. A bought a horse
from B. B claims the horse can be used on the farm. Turns out
the horse is lame and A cannot use him on his farm. Here B

knowingly deceived A and this will amount to fraud.

[4]Misrepresentation-Misrepresentation is also when a party
makes a representation that is false, inaccurate, incorrect, etc.
The difference here is the misrepresentation is innocent, i.e.
not intentional. The party making the statement believes it to
be true. Misrepresentation can be of three types..(A)A person
makes a positive assertion believing it to be true.(B)Any
breach of duty gives the person committing it an advantage by
misleading another. But the breach of duty is without any
intent to deceive.(C)when one party causes the other party to
make a mistake as to the subject matter of the contract. But
this is done innocently and not intentionally.
WHAT IS A CONTRACT--According to section 2(h) of The Indian
Contract Act 1872 “An agreement enforceable by law is a
contract”. It means those agreements are enforceable by law
they are contracts others not. For example, an agreement to
sell a bike may be a contract, but an agreement to go to the
movie may be a mere agreement not enforceable by law. To
go to a movie is a social agreement and social agreements are
not enforceable by law. WHAT IS AN AGREEMENT--According
to section 2(e) of The Indian Contract Act 1872 “Every promise
and every set of promises, forming the consideration for each
other, is an agreement”. We can understand this definition by
an example, A promises to deliver his book to B, and in return,
B promises to pay 1,000 to A. There is said to be an agreement
between A and B.ALL CONTRACTS ARE AGREEMENT”--We
know that when an agreement enforceable by law is a
contract. A contract is an agreement that is enforceable by
law. It is an agreement or set of promises giving rise to
obligations that can be enforced or are recognized by law. In
order to become an agreement into a contract, it has to satisfy
all the essentials of a valid contract as mentioned in section 10
of the Indian Contract Act 1872.Section 10 of this act says, “All
agreements are contracts if they are made by the free consent
of parties competent to contract, for a lawful consideration
and with a lawful object, and are not hereby expressly
declared to be void”.The essentials of a valid contract:-1.There
must be two parties.2.The agreement should be between the
parties who are competent to contract.3.There should be a
lawful consideration. 4.The object of the agreement must be
lawful.5.There should be free consent between the
parties.6.The agreement must not be one that has been
expressly declared to be void.“ALL AGREEMENTS ARE NOT
CONTRACTS”--An agreement is a set of promises. Section 2(e)
of The Indian Contract Act 1872 says, “Every promise and
every set of promises, forming the consideration for each
other, is an agreement”. In an agreement, there is a promise
between both parties. For example, A promises to deliver his
book to B, and in return of B promises to pay Rs. 1,000 to A.
there is said to be an agreement between A and B. After
acceptance of the offer/proposal it becomes a promise,
promise is the result of offer acceptance. Thus, when there is
a proposal/offer from the proposer and the acceptance of that
proposal by the propose it results in a promise. Promise and
reciprocal promise from promisor and promisee form an
agreement.Hence, we can conclude only commercial
agreements where parties are intending to shoulder
responsibility upon each other and when they are entering
into an agreement keeping in mind that in case of breach of
agreement terms by one of the parties, the aggrieved party
may go to court against the party who breaches the terms and
compel him by the process of law to pay compensation as
decided.