Section 2(h) of Indian Contract Act defines contract as an agreement enforceable by law. Two essential elements of contract are agreement and enforceability at law. Agreement= Offer + acceptance. An offer when accepted becomes an agreement.
Sir Fredrick Pollock says “Every agreement and promise enforceable by law”
According to Salmond “A contract is an agreement creating and defining obligation between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of others”
According to Sir William Anson “A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of others”
Essentials of a valid contract
- Offer and acceptance
There must be two parties in an agreement, one making the offer and other accepting it. There must be a offer which is lawful by one party and the lawful acceptance of the offer by other party or parties. The word ‘Lawful’ implies that the offer and acceptance must conform to the rules laid down in the Act regarding offer and acceptance. The offer’s terms must be absolute and unqualified. The acceptance must also be according to the prescribed mode and it must be communicated to the offeror.
- Intention to Create a legal relationship
There must be an intention to create a legal relationship between the parties when they enter into an agreement. When there is no such intention or intention is missing there is no contract between the parties. Social or domestic agreement will not fall into the category of legal relationship and they are not contracts.
- Lawful Consideration
There has to be a consideration in order for an agreement to be enforceable by law. 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[1]. In other words Consideration means an advantage or benefit moving from one party to the other. It is the very essence of Contract. We can also say that consideration means ‘something in return’. When one party gives something and the other gets something in return, the agreement becomes legally enforceable. It is not necessary that consideration has to be in form of cash it may either be an act or abstinence or promise to do or not to do something. Consideration may be in present, past or future. But it has to be lawful and real.
- Capacity to Contract
The parties must have a competency to enter into a valid contract. 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. —Every person is competent to contract who is of the age of majority according to the law to which he is subject,1 and who is of sound mind and is not disqualified from contracting by any law to which he is subject.”[2]. That is a person has to be of age of majority, sound mind and is not disqualified from contracting by any law to which he is subject. A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests. —A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.” A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person, who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.[3]
- Genuine and Free Consent
There must be a genuine and free consent for the creation of every agreement. ‘Free consent’ defined.—Consent is said to be free when it is not caused by— —Consent is said to be free when it is not caused by—”
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21 and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.[4] So when the agreement is induced by coercion, undue influence , fraud, misrepresentation and mistake then the ‘consent’ is not a ‘free consent’.
- Legality of Object
The object of the agreement must be lawful. And it is defined by What consideration and objects are lawful, and what not.—The consideration or object of an agreement is lawful, unless— —The consideration or object of an agreement is lawful, unless—” it is forbidden by law; 14 or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.[5] So the object for which the agreement has been entered into must not be immoral, illegal or opposed to public policy. When the agreement is not lawful it will not fall under the category of Contract that is it would not be enforceable by law.
- Certainty and Possibility of performance
The agreement whose meaning is uncertain or it is not capable of being made certain is void. A term of a contract which is vague and is uncertain is void. An agreement not enforceable by law is said to be void[6]. The following types of agreements are declared to be void:-
(1)Agreements of which consideration and objects are unlawful in part
(2)Agreements without consideration
(3)Agreements in restraint of marriage
(4)Agreements in restraint of trade
(5)Agreements in restraint of legal proceedings
(6)Unmeaning agreements
(7)Wagering agreements
(8) Agreements to do impossible acts
- Legal Formalities
A contract may be made by word or spoken or written but if there is statutory requirement that the contract should be writing, registered or attested, and then such agreement must be so, otherwise it shall not be enforceable.
Conclusion
Therefore to form a valid contract there must be:-
- Offer and acceptance
- Intention to create legal relationship
- Lawful Consideration
- Capacity to Contract
- Genuine and Free Consent
- Legality of Object
- Certainty and possibility of performance
- Legal Formalities
“The views of the authors are personal“
Reference
[1] Section 2(d) of Indian Contract Act
[2] Section 11 of Indian Contract Act
[3] Section 12 of Indian Contract Act
[4] Section 14 of Indian Contract Act
[5] Section 23 of Indian Contract Act
[6] Section 2(g) of Indian Contract Act
