Four Elements Of Contract

Introduction:

Section 2(e) of the Indian Contract Act, 1872 says that every promise and every set of promises, forming the consideration for each other is an agreement. When the agreement is enforceable by law becomes a contract. To enforce the agreement by law there are such elements that are required to be fulfilled.

Elements of Contract:

There are four basic elements; these have to be fulfilled to make a contract. Such as-

Proposal-

One person shows his keenness to do or not to do something with the expectation of acceptance from the other person is a proposal or offer which is defined under section 2(a) of the Indian Contract Act, 1872.

The Supreme Court in Bank of India v. Swarankar said that the contract of employment is governed by the Contract Act. The announcement of a voluntary retirement scheme is not an offer. When the employee makes an offer for retirement and the same is accepted in written becomes effective. The employee who has made an offer under the scheme can withdraw before the acceptance of his request.

Acceptance-

When the proposal made by one party got the asset of another party becomes an acceptance, it is mentioned under section 2(b) of the Indian Contract Act, 1872.

In Gajendra Singh v. Nagarpalika Nigam, Gwalior, the M.P. High Court held that if an authority that calls the tender decided not to accept the tender then the tenderers or even the highest tenderer cannot force the authority to accept the tender. The tenderer has no right until the same has been accepted.

Consideration-

Consideration is defined under section 2(d) of the Indian Contract Act, 1872. It is something that one party gives or does for the other in exchange for the promise. The Calcutta High Court in Fazaluddin v. Panchanam Das has observed that “consideration is the price of a promise, a return or quid pro quo (a favor or advantage granted in return for something), something of value received by the promisee as inducement of the promise”.

The same court in Fanindra v. Kachhemen Bibi said that “consideration received by two mortgagors was good enough to bind all the four who executed the mortgage deed”.

In Chinnaya v. Ramaya, an old lady granted an estate to her daughter (defendant) with a direction that she should pay Rs. 653 annually to her brother (plaintiff). On that day, the defendant promised to pay the same. But she failed to fulfill the promise and took the defense that the plaintiff himself had not furnished the consideration has no right of action. The Madras High Court held that in this agreement, the consideration has been furnished by the defendant’s mother; hence it is enough to enforce the promise between the two.

Legality of object-

An agreement becomes a contract if its consideration and object are lawful. Section 23 of the act describes what considerations and objects are lawful and what are not. It says that both the consideration and object should not be forbidden by law, fraudulent, defeating provision of any law, immoral, opposed to public policy, or hurt any person or property. If the consideration and object of an agreement are not lawful, the agreement is void.

In Nutan Kumar v. IInd Additional District Judge, Banda held that an agreement violating a statute or public policy is void from the start, and even if the parties agree it cannot become valid. In this case, the agreement between them was of a lease and it lacks the allotment or release order, which is required by the law. Therefore, it is void and unenforceable.                                                                                                                                                                                                                                                                            

Conclusion:

In order to make a valid contract, there are many elements, that needed to carry out. But the essential elements which have to be fulfilled are these four- proposal, acceptance, consideration, and legality of an object. To enter into a contract there must be a proposal and that should be accepted. And for a valid contract legal consideration and object is also a necessity.

References:

Books-

Indian Contract Act, 1872

Law of Contract and Specific Relief by Avtar Singh; Ninth Edition

Law of Contract Part I by R.K.Bangia; Edition 2006

Cases-

Bank of India v. Swarankar, AIR 2003 SC 858

Gajendra Singh v. Nagarpalika Nigam, Gwalior, AIR 1966 MP 10

Fazaluddin v. Panchanam Das, AIR 1957 Cal. 92

Fanindra v. Kachhemen Bibi, AIR 1918 Cal. 816

Chinnaya v. Ramaya, 1882 4 Mad. 137

Nutan Kumar v. IInd Additional District Judge, Banda, AIR 1994 All. 298

Aishwarya Says:

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