A contact has been defined in section 2(h) of Indian Contract Act 1864 as “contract- an agreement enforceable by law”. Indian Contract Act defines agreement in Section 2(e) as “Every promise and every set of promise forming the consideration for each other is an agreement”. There is a bit of difference between agreement and contract as all agreements are not contract but all contracts are agreement, agreement may not be enforceable but contacts are always enforceable and agreement does not always grants a right but contract always grants a right.
ESSENTIALS OF VALID CONTRACT
According to Section 10 of Indian Contract Act all agreements are contract if they are made by the free consent of the parties, competent to contract for a lawful consideration, with a lawful object which are not expressly declared by the Act to be void and where necessary, satisfy the requirements to any law as to writing or attestation or registration.
There are basically 10 essentials of a valid contract which are as follows:-
- LAWFUL OFFER AND ACCEPTANCE-
There must be a “lawful offer” and a “lawful acceptance” which will result in an agreement. The term lawful here means that offer and acceptance must satisfy the requirements of the contract act.
Offer is defined in Section 2(a) as “when a 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, he is said to make a proposal”.
Acceptance is defined in Section 2(b) as “promise- when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal , when accepted becomes a promise”.
- INTENTION TO CREATE LEGAL relation
Intention to create legal obligation means that there must be an intension among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreement of a social or domestic nature does not contemplate legal relations and as such they do not give rise to a contract.
An agreement to dine at a friend’s house is not an agreement intended to create legal relations and therefore it is not a contract.
CASE LAW – BALFOUR VS BALFOUR here the defendant was a civil servant in Ceylon. He and his wife were enjoying a leave in England. During the return his wife was not able to return to Ceylon due to some health issues. The defendant agreed to send 30 pounds as maintenance very month during the time they were forced to live apart. She sued him for breach of this agreement. Her action was dismissed on the grounds that no legal relations had been contemplated and therefore, there was no contract.
- LAWFUL CONSIDERATION
The third essential element of a valid contract is the presence of a ‘consideration’. Consideration is defined in 2(d) as “when, at the desire of the promisor, the promise or any other person has done or abstain from doing, or does ,or abstains from doing or promises to do or abstain from doing , something , such act or abstinence or promise is called consideration for the promise”. It is also defined as “the price paid by one party for the promise of the other”. An agreement is legally enforced only when each of the parties gives something or gets something. Consideration is only valid when it is lawful.
The consideration is unlawful if-
- Law forbids it;
- It is fraudulent;
- Involves or implies injury to the person or property of another;
- Is immoral pr is opposed to public policy ;
- It is of such a nature that , if permitted it would defeat the provisions of any law
- CAPACITY OF PARTES
The parties to an agreement must be competent to contract according to section 10 of the contract. In order to be competent to contract, according to section 11 the parties must be:
- Of the age of maturity ;
- Of a sound mind and ;
- Must not be disqualified from contracting by any law
CASE LAW –
MOHORI BIBEE VS DAMODAR GHOSE
Here Damodar Ghose the defendant was a minor and sole owner of his property and his legal guardian was his mother. Brahmo Dutt a money lender through his agent Kader Nath lent a sum of Rs 20,000 with an interest of 12% p.a. on the day of when when the deal was made Damodar Ghosh’s mother notified the appellant that Damodar is a minor and anyone who enters into a contract with him will do so at his own risk.
Therefore Brahmo dutts appeal was dismissed and his request for the return of Rs 10,500 advance was also rejected as Damodar Ghose’s mother notified the appellant about his minority. It was held that a contract with a minor is void ab initio.
- FREE COSENT-
In a contract both parties must agree and give consent to the same thing in the same sense to constitute a valid contract and the consent must be given freely. Section 14 of the act defines free consent as
Consent is said to be free when it is not caused by—
- Coercion, as defined in section 15 as “Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860)or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.”
- Undue influence, as defined in section 16 as “contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.”
- fraud, as defined in section 17 as “Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent 2 , with intent to deceive another party thereto of his agent, or to induce him to enter into the contract:—
(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;
(2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.”
- misrepresentation, as defined in section 18 as
(1) “the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him; by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.”
- mistake, subject to the provisions of sections 20, 21 and 22. As
- “Section 20- Agreement void where both parties are under mistake as to matter of fact.—Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement.
- Section 21-Effect of mistakes as to law.—A contract is not voidable because it was caused by a mistake as to any law in force in [India]; but a mistake as to a law not in force in 1[India] has the same effect as a mistake of fact.
- Section 22-Effect of mistakes as to law.—A contract is not voidable because it was caused by a mistake as to any law in force in [India]; but a mistake as to a law not in force in 1[India] has the same effect as a mistake of fact.”
- LAWFUL OBJECT –
The object used in the formation of a valid contract must be and also on which the parties much agree should be lawful. If the object or consideration is unlawful the agreement will not be enforceable. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property or property of another.
- ORAL,WRITING AND REGISTRATION
Indian Contract act says an agreement can be oral or in writing unless it is required, mentioned or in special cases require them in writing. As under Section 25 of the act – it requires that an agreement to pay a 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.
Similarly, certain other laws may require writing or/and registration to make the agreement enforceable.
The agreement must not be vague or uncertain in order to make a valid contract. It must be possible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced. As section 29 of the act states that “agreements, the meaning of which is not certain or capable of being made certain, are void”.
- POSSIBILITY OF PERFORMANCE-
A contract must be capable of performance as Section 56 of Indian contract act states that “An agreement to do an act impossible in itself is void” and with this the agreement cannot be enforced by law.
- NOT EXPRESSLY DECLARED VOID –
Section 24-30 specifically describes certain types of agreements which have been expressly declared to be void. So the agreement must not have been expressly declared to be void under the act.
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