Essentials of Valid Contract

Offer + Acceptance = Agreement

Agreement + ??? = Contract

ESSENTIALS OF A VALID
CONTRACT
SECTION 10
• All agreements are contracts if they
are made
• with free consent
• of parties competent to contract
• for a lawful object and lawful
consideration; and
• are not expressly declared to be void
PARTIES COMPETENT TO
CONTRACT
SECTION 11, 12

• Persons who are

majors, and

• Persons of sound
mind
Persons of sound mind
• A person is said to
be of sound mind
for the purpose of
making a contract,
when he is capable
of understanding it
and forming a
rational judgement
as to the effects of
the contract upon
him.
Explanation I
A person usually
of sound mind
but occasionally
of unsound mind,
cannot make a
contract when he
is of unsound
mind.
 Explanation II
A person usually
of unsound mind
but occasionally
of sound mind
can make a
contract when he
is of sound mind.
 Persons competent to
contract
1. Can two companies enter into a contract?
2. Can a blind and deaf person (both majors) enter
into a contract?
3. Can a man and his divorced wife enter into a
contract?
4. Can two persons enter into a contract while
having a morning walk?
5. Can two MDs of companies enter into a contract
while in a flight?
CONSENT
• SECTION 13
• Two persons are said to consent each other when
they agree upon the same thing in the same
manner.

FREE CONSENT
• SECTION 14
• A consent is said to be free when it is not caused by
1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake
 COERCION

• Committing or threatening to commit any

act forbidden by Indian Penal Code;
• Unlawful detaining
or threatening to
detain the property
of any person
to the prejudice of
any person with
the intention of
causing any person
to enter into a
contract.
EFFECT

The contract is voidable at the option

of the person whose consent is so
obtained
UNDUE INFLUENCE

1. One of the parties is in a position to

dominate the will of the other
2. The dominating party uses that position to
obtain unfair advantage over the other

Dominating Position
(a) Where he holds a real or apparent authority
over the other or
(b) Where he stands in a fiduciary relation to the
other
(c) Where he makes a contract with a person
whose mental capacity is temporarily or
permanently affected by reason of age,
illness or mental bodily distress
Dominating Position
FRAUD
 FRAUD
Essentials-
1. There must be an intention to deceive.
2. The act must be done by a party to a contract or
with his connivance or by his agent.
3. There must be a false representation of a fact, i.e.,
suggestio falsi.
4. There must be an active concealment of a fact of
which he has the knowledge and duty to disclose,
i.e. , suppressio veri.
5. Here must be a false promise, i.e. , a promise made
without any intention to perform it.
6. Any other act or omission which the law considers
to be fraudulent or fitted to deceive which is done
with the obvious intention to commit fraud.
7. The party so induced must have acted upon it and
suffered loss
Silence – when fraud
Mere silence as to
facts likely to
affect willingness
of a party to enter
into a contract is
not fraud, unless
a) It is the duty of a
person to speak,
or
b) Silence = speech
Thanks