Essentials of a valid contract


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Essentials of a valid contract

  2. 2. CONTRACTAccording to sec.2(h), a contract is defined as anagreement enforceable by law.Agreement- According to sec.2(e), every promise orset of promises forming consideration for each other.Promise- According to sec.2(b), when the person towhom the proposal is made signifies his assentthereto, the proposal is said to be accepted.Proposal when accepted becomes a promise.
  3. 3. 1. Offer & AcceptanceShould be Present At least two parties are needed to enter into a contact.One party has to make an offer and other must acceptit. The person who makes the proposal or offer is calledthe promisor or offeror. While, the person to whomthe offer is made is called the offeree’ or ‘promisee’.There must be an offer and an acceptance to theoffer, resulting into an agreement.
  4. 4. 2. Intention to create legalrelationshipA contract requires that the parties intend to enter into alegally binding agreement. That is, the parties entering intothe contract must intend to create legal relations andmust understand that the agreement canbe enforced by law.Case Law: In Balfour V. Balfour, a husband promised to paymaintenance allowance every month to his wife, so long asthey remain separate. When he failed to perform thispromise, she brought an action to enforce. As it is anagreement of domestic nature, it was held that it does notcontemplate to create any legal obligation
  5. 5. 3. Free ConsentConsent means knowledge & approval of the partiesconcerned.Consent would be considered as free consent if it is notvitiated by coercion, undue influence, fraud,misrepresentation or mistake.Example:- A threatened to shoot B if he (B) does notlend him Rs 2000 & B agreed to it. Here the agreementis entered into under coercion and hence voidable atthe option of B.
  6. 6. 4. Lawful consideration Consideration would generally mean ‘compensation’for doing or omitting to do an act or deed. It is also referred to as ‘quid pro quo’ viz ‘something’ inreturn for another thing. Such a consideration shouldbe a lawful consideration.Example- A agrees to sell his books to B for Rs 100. B’spromise to pay Rs 100 is the consideration for A’spromise to sell his books & A’s promise to sell thebooks is the consideration for B’s promise to pay Rs100.
  7. 7. 5. Capacity to Contract The parties making the contract must be legallycompetent. Law prohibits :-1. Minor2. Person of unsound mind (excluding the Lucidintervals)3. Person who are otherwise disqualified like an alienenemy, insolvents, convicts, etc from entering intoany contract.
  8. 8. 6. Legality of ObjectThe object of the agreement must be lawful. Anagreement is unlawful, if it is:-(i) Illegal(ii) Immoral(iii) Fraudulent(iv) Of a nature that, if permitted, it would defeat theprovisions of any law(v) Causes injury to the person or property of another(vi) Opposed to public policy.
  9. 9. 7. Certainity The terms of a contract must not be vague oruncertain. If an agreement is vague and its meaning cannot beascertained, it cannot be enforced.
  10. 10. 8. Possibility of Performance The terms of a contract must be such as are capable ofperformance. An agreement to do an impossible act isvoid and is not enforceable by law.
  11. 11. 9. Writing & registration Generally, a contract may be oral or in writing.However, certain contracts are required to be inwriting and may even require registration. Therefore,where law requires an agreement to be put in writingor be registered, the same must be complied with. For instance, the Indian Trusts Act requires thecreation of a trust to be reduced to writing.
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