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ESSENTIALS OF A VALID CONTRACT UNDER INDIAN CONTRACT ACT

written by SAPTAPARNI RAHA

ESSENTIALS OF A VALID CONTRACT

UNDER INDIAN CONTRACT ACT

 

The term Contract has been defined under section 2 (h) of the Indian Contract Act which says
that an agreement enforceable by law is a contract . Both the parties are requires to enforce
the agreement but if any one of them refuses to perform it then other party shall have the right
to take an action in a court of law against such party . If that agreement needs to be
enforceable by law then that agreement shall possess some characteristics so that the contract
can be a valid contract mentioned under section 10 of the Indian Contract Act .
Essentials of a valid contract : The agreement shall fulfil following criteria

  •  Offers and acceptance
  •  Legal Relationship
  •  Lawful Consideration
  •  Capacity of Parties
  •  Lawful Object
  •  Writing and Registration
  • Certainty
  • Possibility of Performance
  • Not Expressly Declared Void
  1. Offers and Acceptance : The first and foremost criteria is that there must be a lawful offer
    and acceptance . One party requires to make an offer to other party and other party shall
    accept it . This offer and acceptance both needs to be lawful . Here the term lawful means that
    offer and acceptance shall fulfil the requirements of contract Act . There must be a clear
    intention of creating a legal relation .
    Example : Aman says Ria to purchase his pen from him for rupees 45 . If Ria accepts his
    offer and purchase that same pen from Aman then it can be said that Ria accept the offer and
    it is an acceptance , on the other hand Aman makes the offer to Ria to purchase the pen from
    him .
  2. Legal Relationship : The parties to an agreement shall create a legal relationship . This legal
    relationship can be create by commercial means that means parties must have the intention to
    create the legal relation .
    Example 1 : Father promises his son that he will pay rupees 500 every month as a pocket
    money if he continues his study well but later father refuses to pay the amount as his son
    failed to keep the promise . Here in this particular situation son cannot recover the money as
    it is a social agreement and it does not create any legal relationship between them .
    Example 2 : Jack offers to sell his book to Priya for rupees 700 and Priya accept the offer . In
    this situation it creates a legal relationship between Jack and Priya and it is a contract .
    Lawful Consideration : There must be a consideration to become a valid contract . The term
    consideration connotes something in return . When both the parties in any particular
    agreement give something and get back something in return then only the agreement shall be
    considered as enforceable by law .
    Example 1: A agrees to sell his vacant land to B for rupees 20 lakh. It is the consideration for
    A as he promises to sell his land to B . On the other hand to pay rupees 20 lakh to A is the
    consideration for B .These are lawful consideration .
    Example 2 : Ram promises to give the employment to Joy in the private company and in
    return Joy promises to pay rupees 30 lakh to Ram . In this situation the agreement is void and
    the consideration is unlawful .
    Capacity of Parties : The parties to the agreement must have the capacity to contract . The
    parties must fulfil the age of 18 years and shall have the sound mind . Parties also shall not be
    disqualified by any other law . If any of the parties posses the age of minority and suffers
    from unsound mind and have in drunkard stage then the agreement shall considered to be
    void ab initio .
    Example 1 : A enters into an agreement with B in an unsound mind to sell his property of
    rupees 10 lakh . Here it is not A is not competent to contract .
    Example 2 : Ram aged 22 years promises to sell his land to Jit for rupees 10 lakh . Here it is
    a valid contract as Ram attains his majority .
  3. Free Consent : Parties shall have the free consent to agree with the same thing . They must
    have freely agreed to come into the agreement .
    Example: Aman compels Jit to enter into a contract on the point of knife and Jit ,
    subsequently Jit agrees on it . Here in this situation it is not a valid contract as consent is not
    freely given by Jit to Aman .

4. Lawful Objects : The agreement between the parties must be made upon a lawful object .
The object must not be fraudulent , illegal , immoral shall not be opposed to public policy . It
also shall not imply injury to other person or property of another .
Example : S promises to T that he will give rupees 10 lakh to T if he commits murder of C .
This agreement is illegal for the unlawful object of S .
Writing and Registration : The contract can be either oral or in writing as mentioned in the
Indian contract Act . But in practice parties prefer to come into a contract in writing to prove
in court in case of any dispute occurs . But contract make in oral if proved shall not be
considered as invalid just for that is not in a written format .
Example 1 : A make an oral promise to sell his car to B for rupees 2 lakh . It is a valid
contract as per the Indian contract Act .
Example 2 : A make an oral promise to sell his land to C , but it is not a valid contract as for
the immovable property the contract must be in writing .

Certainty : Section 29 of the Indian Contract Act states that agreements between the parties
must in certain nature that means the terms and conditions of the agreement shall be clear .
Example 1 : Raj promised to sell his books to Rita . Here the quantity and title of the books
are not clear to Rita so the agreement is void as terms and conditions are not clear .
Example 2 : C promised to sell 20 tons of petroleum oil to D . Here in this situation the
quantity and what kind of oil he will sell to D is absolutely clear to D . So the contract is valid
.
Possibility of Performance : The contract must be possible to perform according to section
56 of the Indian Contract Act .

Example 1 : D make a promise to C that he will discover the treasure by magic , here the
agreement does not have any possibility to perform so it is not a valid contract .
Example 2 : A make a promise to B that he will give some money to his father’s treatment if
B can return it within an year . The agreement has the possibility of performance so it is a
valid contract .

Not expressly declared void : Section 24 to 30 explains certain types of contract which
declares to be void . If there is an agreement between the parties that restrain someone’s trade
is expressly declared void . So agreement that does not fall under this domain must be
considered as a valid contract .
Example : A offers to start a business with B if B gives his free consent . It is a valid
contract .

Case Name : Balfour v. Balfour

Citation : [1919] 2 KB 571
Facts : Mr . and Ms . Balfour are happily married couple and use to live in Ceylon ( now Sri
Lanka ) . They went to enjoy their vacation in England and in the meantime Ms. Balfour was
diagnosed with Rheumatic Arthritis so she was advised to take proper rest by her doctor
because her health could be deteriorate if she changes weather at this moment . So she stayed
back and Mr. Balfour promised her to send 30 $ as he decided to return back in Ceylon . But
the moment he returned back he stopped sending the amount . So Ms. Balfour sued against
him .
Issues : Whether there was any valid contract existed between Mr. And Ms. Balfour ?

Judgment : As there was no intention to create any legal relationship between them and it is
merely a domestic matter so that there was no contract between Mr. And Ms . Balfour . The
appellate court also held that the promise to pay $ 30 per month by Mr. Balfour did not
initiate any legal consequence upon him if he fails to pay that amount . The court also said
that if court starts to enforce such agreement made between them then the court shall be
flooded by with matrimonial dispute .

Case Name : Lalman Shukla V. Gauri Dutt

Citation : 1913 40 ALJ 489
Facts : The nephew of Gauri Dutt went missing . So he sent his servants to search the child in
different places . Lalman Shukla was his one of servant who went Haridwar to search the
absconding child . Gauri Dutt paid him all the expanses he needed . When the servant
successfully returned back to Kanpur with the absconded child he was given two sovereign
along with rupees 20 . But everyone was busy to search the child and defendant was
circulated the pamphlets with announcing the reward of rupees 501 but the plaintiff who was
also involved to search the child was not aware of the reward . But he kept his mouth shut
and continue his work for six months and after that he filed a suit .
Issue : 1) Whether there was any valid agreement or not ?
2) Whether Mr. Lalman entitled to receive the reward or not ?

Judgment : It was been stated by the court that there were no ingredients exist that fulfils the
criteria of a valid contract . Knowledge of the particular offer is the primary element for any
valid contract but he was not aware about the offer so he was failed to give the assent . So
here it has been decided that acceptance is one of the essential to be a valid contract so here
plaintiff just fulfilled his obligation by searching that missing boy .

Case Name : Mohori Bibi v. Dharamdas Ghosh

Citation : 1903 30 CAL 539
Facts : Dharamdas Ghosh requires money so he pledged his property and asked for loan of
rupees 20,000 from Brahma Dutt . Brahma Dutt was an attorney who knew that Dharamdas
was a minor . So plaintiff filed a suit against Brahma Dutt that mortgage deed shall be void as
he was a minor at the time of contract .
Issue : Whether the mortgage deed was void or not ?
Judgment : It was been decided by Privy council that the mortgage deed was void as the
person who mortgaged the property was minor at the time of execution . The contract or mortgage shall be held between the parties who attains the majority . Minors are incompetent
to contract in the eyes of law .

Conclusion :

After analysing all the criteria and some landmark judgements
these are clear to us that there are some basic essentials needs to be fulfil to
constitute a valid contract or else the contract will be void .

 

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Legal Update of 4th March, 2021

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