ESSENTIALS FOR A VALID CONTRACT

According to Section 10 of the Indian Contract Act, 1872- All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.

Contracts vary in terms of their terms, conditions, length, complexity, etc. but all contracts must consist of these six essential elements in order to become a valid contract. The six essential elements are-

  1. Proposal and Acceptance
  2. Free Consent
  3. Competent Parties
  4. Lawful Consideration
  5. Lawful Object
  6. Intention to enter into a legal relationship

When an agreement consists of all these essential elements, the agreement becomes a valid contract which is legally binding on the parties involved.

1.A. PROPOSAL

According to Section 2(a) of the Indian Contract Act, 1872 – When one person signifies to another his willingness to do to 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.

It is important to note that a proposal has both positive as well as negative connotations to it because one person signifies his willingness to do or to abstain from doing anything.

According to Section 2(c) of the Indian Contract Act, 1872- The person making the proposal is called the “promisor” and the person accepting the proposal is called the “promise.”

THINGS TO REMEMBER WHILE MAKING A PROPOSAL

  • There should be an object of the proposal– This means that the proposal should be made with a view to obtain the assent of the other person to do or not do something.
  • There should be an intention to create legal relationship– This means that a person should make an offer or proposal to another person only when he/she has an intention of binding themselves legally as a result of such an agreement.
  • The proposal must be communicated– According to Section 4 of the Indian Contract Act,1872; the communication of the proposal is complete when it comes to the knowledge of the person to whom it is made.
  • A proposal may be revoked– According to Section 5 of the Indian Contract Act,1872; a proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
  • A proposal may be express or implied– A proposal is said to be express if it is made in words but if it is made otherwise than in words, it is said to be implied.

1.B. ACCEPTANCE

According to Section 2(b) of the Indian Contract Act,1872- When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.

Effect of acceptance– A contract is created only after the offer is accepted.

THINGS TO REMEMBER WHILE MAKING AN ACCEPTANCE

  • An acceptance must be absolute– According to clause (1) of Section 7 of the Indian Contract Act,1872; an acceptance must be absolute and unqualified.
  • Acceptance should be made in some usual and reasonable manner– According to clause (2) of Section 7 of the Indian Contract Act,1872; acceptance must be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted, and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but, if he fails to do so, he accepts the acceptance.
  • Acceptance can be express or implied– Acceptance is said to be express if it is made in words but if it is made otherwise than in words, it is said to be implied.
  • Acceptance may be revoked– According to Section 5 of the Indian Contract Act,1872; an acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

2. FREE CONSENT

According to Section 14 of the Indian Contract Act, 1872 – Consent is said to be free when it is not caused by-

  • coercion, as defined in section 15, or
  • undue influence, as defined in section 16, or
  • fraud, as defined in section 17, or
  • misrepresentation, as defined in section 18, or
  • 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.

3. COMPETENT PARTIES

Section 11 of the Indian Contract Act, 1872 deals with the question of who are competent to contract.

According to Section 11 of the Indian Contract Act, 1872- Every person is competent to contract

  • who is of the age of majority according to the law to which he is subject
  • who is of sound mind
  • who is not disqualified from contracting by any law to which he is subject.

4. LAWFUL CONSIDERATION

According to Section 23 of the Indian Contract Act, 1872-  The consideration or object of an agreement is lawful, unless—

  • it is forbidden by law;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. 

Illustrations

  • A agrees to sell his house to B for 10,000 rupees. Here, B’s promise to pay the sum of 10,000 rupees is the consideration for A’s promise to sell the house and A’s promise to sell the house is the consideration for B’s promise to pay the 10,000 rupees. These are lawful considerations
  • A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful.

4. LAWFUL OBJECT

According to Section 23 of the Indian Contract Act, 1872- The consideration or object of an agreement is lawful, unless—

  • it is forbidden by law ;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. 

Illustrations

  • A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful.
  • A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful.

5. INTENTION TO ENTER INTO A LEGAL RELATIONSHIP

  • This means that the parties have an intention of entering into a legal contract and thus fulfil its obligations lawfully.
  • If there is no intention to enter into a legal relationship, the contract cannot be said to be enforceable in the court of law and hence the parties to the contract will not get any opportunity to sue each other.
  • Social or domestic agreements such as that of between a husband and wife are not enforceable (exceptions are there) because there is no intention between the parties to enter into a legal relationship with each other.

REFERENCES

https://ironcladapp.com/journal/contracts/elements-of-a-contract/

https://www.upcounsel.com/7-essential-elements-of-a-contract

https://www.vedantu.com/commerce/essentials-of-valid-contract

https://indiankanoon.org/doc/1625889/#:~:text=The%20agreement%20is%20void%2C%20as,as%20its%20object%20is%20unlawful.%22

https://docpro.com/blog14/6-essential-elements-of-a-valid-contract-with-examples

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

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