Essentials Of A Valid Contract

The essentials of a valid  contract are

  1. Two Parties

  2. Consensus- ad – idem

  3. Capacity to Contract

  4. Free Consent

  5. Lawful Consideration

  6.  Legal Relationship

  7. Lawful object

  8. Terms must be certain  and

  9. Possibility of Performance

Two Parties:

To Constitute a contract there must be an offer and acceptance. The person who offers or makes an offer is called an “offeror” and the other party/person who accepts the offer is called ” Acceptor”.

Consensus-Ad-Idem

For a contract to be valid there must exist consensus-ad-idem. It means identity of minds must exist between the parties. in other words, both the parties to the contract should have agreed about the same thing at the same time in the same sense. In the absence of consensus between/among the parties, the contract can be declared null and void

Capacity to contract

Acording to section  11 of Indian Contract Act

. “Who are competent to 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. —

Free Consent:

According to section 13 of Indian contract act, consent is defined as

‘Consent’ defined.—Two or more persons are said to consent when they agree upon the same thing in the same sense.

Section 14 of Indian Contract act defines free consent as

14. ‘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.

Lawful Consideration:

As per section 2(d) of Indian Contract act:

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;

Therefore, it is said that ” a contract without consideration is void”. In other words, a contract without consideration is not valid and enforcable, Therefore it has been enshrined in the legal maxim, ” Ex nudo pacto non oritur actio”  which means ” out of a nude fact, no cause of action arises”.

However there are exceptions to this general rule under section 25 of Inidan contract act

i) Love and affection(sec 25(1))

ii) Compensation for voulntary services(Sec 25(2) and

iii) Time Barred Debt (Sec 25(3))

vi) Legal Relationship :

A contract to be enforcable, it must create legal relationship between the parties. Mere domestic or social  agreements don’t create legal relationship/ consequences.

CASELAWS:

  1. Balfour vs Balfour
  2. Harvey vs Facey
  3. Badri Prasad vs state of Madhya Pradesh

vii) Lawful Object:

For a contract to be valid, the object for which it has been entered into must be lawful. According to section 23 of the Indian Contract act,

23. 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.

An agreement entered into against the interests of general public is deemed to be opposed to public policy.

Such agreements are

  1. Agreement in restraint of trade(sec 27)
  2. Agreement in restraint of Marriage (sec 26)
  3. Agreements in restraint of legal proceedings( Sec 28)
  4. Wagering agreement(Sec 30)
  5. Agreement to commit a crime
  6. Agreement with alien

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.

viii) Terms must be certain:

The  terms and conditions of the contract  shall be clearly furnished in the agreement without any ambiguity or vagueness.

Case Laws:

Taylor vs Portrington:

Dwarakadas vs Dholu  ram gogunmall

IX) Possibility of Performance :

If the performance of a contract is impossible, it is void

As per Section 56 of the Indian Contract Act

Agreement to do impossible act.—An agreement to do an act impossible in itself is void. .” Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.1 —A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.2″ Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise. —Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

 

 

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