INDIAN CONTRACT ACT

Essential elements of valid contract

1) Proposal & Acceptance 2) Consideration-lawful consideration with lawful object. 3) Capacity of parties to contract- competent (capable) parties 4) Free consent (Approval). 5) An agreement must not be expressly declared to be void

Essential elements of valid contract

6) Writing and Registration, if so required for law 7) Legal Relationship 8) Certainty 9) Possibility of performance 10) Enforceable by law

Proposal /Offer
Expression of willingness with a view to seek the assent of the other. Thus, mere expression of willingness doesn¶t constitute offer/proposal. Definition: ³When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence(self Discipline), he is said to make proposal´. [(Sec. 2(a)]

Acceptance
Giving of assent to the proposal. Definition : ³When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.´ A proposal when accepted, become a promise. [(Sec. 2(b)] Promise = Proposal/Offer + Acceptance

Consideration
³When at the desire of the promisor, the promisee or any other person has done or abstain from doing something such act or abstinence or promise is called a consideration for the promise.´ [(Sec. 2(d)] Every contract consist of 2 parts: i) Promise : A promise is often made in return for promise.

Consideration
ii) Consideration for promise : Consideration is the cause of promise. It is the most essential element of contract. As a general rule, agreement without consideration is void. The promise for a promise in return is consideration.

Capacity of parties to contract

Sec. 11 of the act states that every person is competent to contract who is of the age of majority according to a law which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. The person, firstly, should be a major. Secondly, he should be of sound mind. Eg. He should not be lunatic or insane.

Free Consent
Parties to a contract must give their free consent. Eg. Both the parties must agree upon the same thing in the same sense. Two or more persons are said to consent when they agree upon the same thing in the same sense. (Sec.13) Mere consent is not enough. Consent of parties must be free. Eg. It must not have been obtained by coercion/compulsion, under influence, fraud, misrepresentation or mistake.

An agreement must not be expressly declared to be void

A void agreement is not enforceable by law [sec.2(g)]. It has no legal sanctity(purity). It does not give any rise to any rights and obligation. A void agreements are not enforceable by law as they are opposed to public policy like agreements in restraint of trade or in restraint of marriage or in restraint of legal proceeding.

Writing and Registration

Oral contract is valid contract. However, the contract must be in writing and registered, if so required by any law, for e.g. gift, mortgage, sale, lease, etc. Documents specified under section 17 of the Indian registration Act, 1908, are required to be registered. In short, Usually important documents are entered into writing 7 are registered. A written contract is repository & memorial of truth.

Legal Relationship
Agreement which creates legal relation or are capable of creating legal relations are contract. Eg. An invitation to a dinner does not create any legal relation therefore it¶s not a contract. Existence of legal relationship is determined by the intention of parties. There must be common intention of the parties to create legal relations in order to constitute a contract. Eg. Agreement of buying or selling, marriage, etc. create legal relationship therefore it¶s valid contract.

Certainty
The term of contract should not be vague, it should be clear. Contract which are vague cannot be enforced. Such contract can be avoided by showing that there is ambiguity.

Possibility of Performance
Contract based on impossibility of performance are not valid. The contract must be capable of being performed. Eg. A promise to share with B 50% of treasure, if B creates a treasure by magic. Such agreement are incapable of performance and, therefore; it¶s void contract.

Enforceable by Law
A contract in order to be valid must be enforceable by law which element distinguishes agreement and contract. If it is enforceable by law, it is a contract, otherwise it is an agreement.