1. A contract is an agreement that is enforceable by law, containing an offer, acceptance, and consideration.
2. The document discusses the key elements of a valid contract, including offer and acceptance, lawful object and consideration, capacity of parties, and free consent.
3. It provides examples to illustrate concepts like what constitutes an agreement, how consideration works, and what makes parties competent to contract.
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What is a contract?
According to section 2(h) of the Indian
Contract Act, 1872 “An agreement
enforceable by law is a contract.“
A contract is a combination of the two
elements:
• There must be an agreement
• Agreement must be enforceable by law
(obligation)
Contract = Agreement + Enforcement by law
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What is an Agreement?
Section 2(e) “Every promise and every set
of promises, forming the consideration
for each other, is an agreement.” Thus it
is clear from this definition that a ‘promise’
is an agreement.
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What is an Agreement?
Agreement = offer + Acceptance
Example - Ram offers to sell his car for
Rs 1,00,000 to Shyam. Shyam accepts this offer.
This offer after acceptance becomes promise and
this promise is treated as an agreement between
Ram and Shyam.
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Enforceable By Law
“Means having the Binding effect of law”
EXAMPLE - Suppose, a person X enters into a contract with
person Y for sale of his car to Y for Rs. 50,000. Now X and Y
may choose to record the terms and conditions governing the
sale in question on a piece of paper.
This contract is enforceable under law which means that if Y
takes possession of X's car but refuses to pay Rs. 50,000 to X,
as was agreed, X can approach a court of law and seek
appropriate relief such as requiring Y to return the car to X
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Essentials of a Valid Contract
• Offer and Acceptance
• Intention to Create Legal obligation
• Lawful Consideration
• Lawful Object
• Writing and Registration
• Certainty
• Possibility of Performance
• Capacity of Parties
• Free Consent
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Offer and Acceptance
There must be a 'lawful offer' and a 'lawful
acceptance'. In other words, there are some
legal rules governing offer and acceptance.
Example – “A” offers to sell his cycle to "B"
for Rs.45000, This is an offer, if "B" accepts
this offer there is an acceptance.
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Intention to Create Legal obligation
The parties to an agreement must create legal
obligations. It means that if one party does not
fulfill his promise, he shall be liable for breach of
contract.
Example – "A" offers to "B" to
sell his home for Rs.2Million,
It is a contract as it creates legal
obligation.
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Lawful Consideration
Consideration is the price paid for the promise of the other.
Consideration may be an act/abstinence or a promise.
It may be past, present, or future. That something given or
taken is called consideration.
Example – "A" promises to sell his car to "B"
for 1 million, For "A" the 1 million is
consideration and for "B" car is the
consideration.
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Lawful Object
It is necessary that agreement is made for a lawful object. The
obiect of contract must not be illegal, immoral, opposed to
public policy.
Every agreement with unlawful object is illegal and therefore
contract is void.
Example – "A" hires a house to use for
gambling. The object of agreement is illegal
and void.
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Writing and Registration
A contract may be oral or in writing, It is preferable that the
contract be in writing because it is easy to prove in court.
Example – An agreement for the
sale of immovable property must
be in writing and registered.
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Certainty of Terms
The terms and conditions of a contract must be clear,
complete and certain. If the terms are uncertain the
agreement is void.
Example – "A" promises to sell 200 books to "B"
without specifying their titles. The agreement is void
because the terms are not clear.
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Possibility of Performance
A valid contract must be capable of being performed, an
agreement to do an impossible act is void.
If the act is legally or physically impossible to perform, the
agreement cannot be enforced by law.
Example – "A" agrees with "B" to discover a
treasure by magic, the agreement is not
enforceable.
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Capacity of Parties
An agreement is enforceable if it is made by parties who are
the competent to contract. To be competent to contract, it is
essential that the parties are of the age of majority, have sound
mind etc.
Example – "M" a person of unsound mind
agree to sells his house to "S" for Rs 2 lacs. It is
not a valid contract because "M" is unsound.
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Free Consent
For a valid contract, it is essential that the consent of parties
must be free, Consent is free when it is not obtained by force,
undue influence, fraud, mispresentation or any kind of mistakes.
If the consent of either party is not free, the agreement cannot
become a contract.
Example "A" forced "B" at gun point to enter
into a contract.
