The word contract is derived from the Latin word “Contractum” which means “drawn together”. To the layman, the word “contract” probably means “an agreement’ which can be enforced in the court of law.
2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Contract
The word contract is
derived from the Latin
word “Contractum”
which means “drawn
together”. To the layman,
the word “contract”
probably means “an
agreement’ which can be
enforced in the court of
law.
4. Definition
Section 2 (h) of the
Indian Contract Act
defines the term
contract as follows: “
An agreement which
is enforceable at law
is contract”.
6. Example
Basil invites Hari to dinner and Hari accepts
the invitation. It is only a social agreement and
not enforceable in a court of law. So it is not a
contract. Basil agrees to sell his house to Hari
for Rs 50,000. This is a contract.
8. Elements of a contract
The essential elements
of a contract are
contained in the
definition of contract
given in section 10 of
contract Act.
9. Elements of a contract
1. Agreement.
2. Consensus of Idem.
3. Capacity of parties.
4. Free consent.
5. Consideration.
6. Lawful Object.
7. Not declared to be void.
8. Certainty and possibility of
performance.
9. An intention to create legal
relationship.
10. Elements of a contract
• Agreement - There
must be an agreement
between the parties of
a contract. An
agreement involves a
valid offer by one party
and a valid acceptance
by the other party.
11. Example
Sanitha sends a proposal to Julie to purchase
her house for Rs 5 Lakhs and Julie accepts the
proposal, then this results into an agreement.
12. Elements of a contract
• Consensus of Idem –
The parties to contract
must agree upon the
subject matter of the
contract if the same
manner and in the
same sense.
13. Example
Adarsh has two houses, one at Trivandrum
and another at Kochi. Adarsh expresses his
willingness to sell on of his houses to Shanu.
Adarsh had in his mind house at Trivandrum
where Shanu had house at Kochi in mind. So
there is not Consensus Ad Idem.
14. Elements of a contract
• Capacity of parties – There
must be at least two parties
to every contract. These
parties must have legal
capacity to enter into a
contract. Every person who is
a major and possesses sound
mind is competent to enter
into a contract. (Minors,
Lunatics, drunken persons
not competent).
15. Elements of a contract
• Free consent – For the
formation of a contract,
one person must give his
consent to another person.
The consent thus obtained
must be a free consent. A
consent is said to be free if
it is not caused by
coercion, undue influence,
fraud, misrepresentation
or mistake.
16. Example
Arun asks Ajas to sign an agreement. Ajas
refuses to do it. So Arun threaten Ajas of
severe consequences if Ajas is not signing the
document. So Ajas finally agrees, fearing
consequences. The consent thus shown by
Ajas is not free.
17. Elements of a contract
• Consideration –
Consideration means
something in return. In every
contract, each agreement
must be supported by
consideration, when one
party agrees to give
something (or give up
something) he must be
benefited by the other party.
18. Example
Amal offers to sell his house to Jasir for Rs 4
Lakhs. Jasir accepts the proposal. Here, the
consideration for the sale of his house is Rs. 4
Lakhs and the consideration of Jasir’s payment
of 4 Lakhs is the house.
19. Elements of a contract
• Lawful Object – The object
of an agreement must be
lawful. It must not be
illegal or immoral or
opposed to public policy.
When an object of a
contract is not lawful, the
contract is void.
20. Example
Eldhose promises to pay Aiju Rs 5 Lakhs for
murdering Davood Ibrahim. Here the object of
the contract is to commit murder. It is
unlawful and therefore the contract becomes
void.
21. Elements of a contract
• Not declared to be void – The agreement might
not have been expressly declared void by any law in
force in the country. In such cases, the agreement
cannot be enforced.
22. Example
A agrees to supply liquor to B, subsequently
prohibition Act comes into force. Thus all
agreement to supply liquor become void,
thereafter. Therefore B cannot enforce the
agreement which is made before the act comes
into force. The agreement has already become
void from the date of prohibition order come into
effect.
23. Elements of a contract
• Certainty and possibility of
performance – The term of
contract should be certain
and precise. They should
not be vague and they
should not create any
confusion in the minds of
the parties.
24. Example
Sanitha agrees to sell one of her houses. She
has four houses. Here the terms of agreement
is uncertain.
A agrees to pay Rs 1 Lakh to B if B brings his
son (who died last year). This is an impossible
act .In both these examples, the agreement
void.
25. Elements of a contract
• An intention to create
legal relationship – The
agreement should create a
legal obligation. Mere
informal promise is not to
be enforced. Social
agreements are not to be
enforced as they do not
create any legal obligation.
26. Agreement
• All contracts are
agreements but all
agreements are not
contracts.
• Every promise and every
set of promises forming
consideration for each
other is an agreement.
• Agreement = Offer +
Acceptance.
• An agreement not
enforceable by law is said
to be void.
27. • Definition of contract.
• Essential elements of contract.
• Agreement.
