Indian contract act_1872 by Neeraj Bhandari ( Surkhet.Nepal )
Essential Elements of
OF A VALID CONTRACT
All agreements are not contracts. Only that agreement
which is enforceable at law is a contract. An agreement, to
be enforceable by law , must possess the essential
elements of a valid contract as contained in Section 10 of
the Indian Contract Act . These are :
(1)Offer and Acceptance. In order to create a
valid contract, there must be a „lawful offer‟ by one party
and „lawful acceptance‟ of the same by the other party
(2) Intention to create legal relationship. In
case there is no legal relationship between the parties,
there is no contract . Agreements of social or domestic
nature do not contemplate legal relations.
(3) Lawful Consideration. Consideration means
„something in return‟. It may be in the form of money, service,
goods . Agreements made without consideration are
unenforceable. And the consideration must be real and
(4) Capacity of parties. The parties to an
agreements must be able to contract. The following are not
capable to contract:
• Person of unsound mind
• Person disqualified by law.
(5) Free Consent. Consent means the parties must
have agreed upon the same thing in the same sense.
Consent is said to be free when it is not caused by-
(a) Coercion (b) Undue influence
(c) Fraud (d) Misrepresentation
(6) Lawful object. The object of an agreement must
be lawful. Object means the purpose or design of the
contract. The object is said to be unlawful if-
• It is forbidden by law.
• It is fraudulent
• It is opposed to public policy
• It involves injuries to the person
(7) Certainity of meaning. According to Section 29
“Agreements the meaning of which is not certain or capable
of being made certain are void”. The terms of the contract
must be precise and certain. The meaning should not be
vague. A contract may be void on the ground of uncertainty.
(8) Possibility of performance. If the act is
impossible in itself, physically or legally, it can not be
enforced at law. For e.g., A agrees with B to discover
treasure by magic. Such agreement is void.
(9) Not declared to be void or illegal. The
agreement though satisfying all the condition for a valid
contract must not have been expressly declared void by any
law in force in the country . For e.g., Agreements in restraint
of trade, marriage etc, are void.
(10) Legal formalities. An oral contract is a valid
contract, except in those cases where writing, registration etc.
is required by some statute. In India writing is required in case
of sale, mortgage, lease, etc.
Contracts can be classified on the basis of their (a) validity,
(b) formation, (c) performance
On the basis of validity
1.Valid contract. An agreement enforceable by law is a
valid contract. An agreement becomes contract when all the
essential of a valid contract as laid down in Section 10 are
2.Void contract. An agreement which was legally
enforceable when entered in to the but becomes void due to
impossibility of performance. A void contract is not necessarily
unlawful, but is destitute of legal effects.
3. Void agreement. According to Section 2 (g), “an
agreement which is not enforceable by law is void.” For
e.g., an agreement with a minor.
4. Voidable contract. According to Section 2 (i), “ an
agreement which is enforceable by law at the option of
one party but not at the option of the other is a voidable
5. Unenforceable contracts. It is a contract which
is otherwise valid, but cannot be enforced because of
some technical defects like absence of a written form, or
absence of proper stamp.
6. Illegal agreements. A contract which is either
prohibited by law or otherwise against the policy of law is
an illegal agreement. It is void ab initio.
Difference between void agreement and voidable
1.Legal effects. A void agreement has from the very beginning
no legal effects. A voidable contract is one in which one party
can affirm or reject at his option.
2. Curability. The defect of a voidable contract is curable. But a
void agreement is void ab initio and its defects are incurable.
3.Compensation. There is no compensation in a void
agreement. But in case of voidable contract, a person is
entitled to compensation for loss suffered by him due to non-
performance of the contract.
Difference between illegal and void agreements
1.Void agreements may be void for a reason other than
illegality. All illegal agreements are void.
2. parties to a void agreements may not be punished but
parties to an illegal agreements are punished.
On the basis of formation
1. Express contract. An express contract is one
entered into by words which may be either spoken or written.
In it offer and acceptance is made in words.
2. Implied contract. Implied contracts are made by the
circumstances and the conduct of the parties who made
3. Quasy contract. It is a contract in which there is no
intention on either side to make a contract, but law imposes
a contract. For e.g., a finder of a lost good is under the
obligation to find out the true owner and return the good.
4. E-com contract. These contracts are entered into
between the parties using internet.
On the basis of performance
1. Executed contract. An executed contract is one
where both the parties have performed their obligations. In
other words it is a complete contract.
2.Executory contract. where the contract is yet to be
performed by one or both the parties, the contract is executory
Executory contracts may be
(a) Unilateral contract. A unilateral contract is a one
sided contract in which only one party has to perform his
(b) Bilateral contract. Where the promise is outstanding
on the part of both the parties, it is known as the bilateral
CLASSIFICATION OF CONTRACTS UNDER
1. Formal contracts. These contracts are those which
are made without consideration. These include (a) Contracts
of record and (b) Contracts under seal
(a) Contract of record – Such contracts exist by the
reason of the entry in the records of the court in which
proceedings are brought.
(b) Contract under seal – these are created by sealed
documents. It is written and signed by the parties.
2. Simple contracts. Contracts which are not formal
are known as simple contracts. They may be in writing, or
made orally, or they may be implied from the conduct of the