Essentials or Requisites to make a contract or agreement valid as per section:10 of Indian Contract Act,1872. The famous case law Balfour Vs Balfour to explain the intention to create a legal relationship is highlighted

1. ESSENTIALS OF VALID CONTRACT
Dr.R.Jolly Rosalind Silva

2. Section 10 of the Act,
“all agreements are contracts if they are
made by free consent of the parties,
competent to contract, for a lawful
consideration and with a lawful object
and are not expressly declared to be
void”.

3. 1.Offer and Acceptance or an agreement:-agreement
is an outcome of offer and acceptance.
2.Free Consent: Two or more persons are said to
consent when they agree upon the same thing in
the same sense.
 identity of minds - consensus ad idem.
 consent must be free- not caused by coercion,
undue influence, fraud, misrepresentation or
mistake.
Example :A, who owns two cars is selling red car to
B. B thinks he is purchasing the black car. There is
no consensus ad idem and hence no contract

4. 3. Capacity of the parties: Capacity to contract means
the legal ability of a person to enter into a valid
contract
– is of the age of majority
– is of sound mind
-is not disqualified by law
4. Consideration: It is referred to as ‘quid pro quo’ i.e.
‘something in return’.
A agrees to sell his books to B for ` 100.

5. 5.Lawful Consideration and Object: The
consideration and object of the agreement must be
lawful
‘A’ promises to drop prosecution instituted against ‘B’
for robbery and ‘B’ promises to restore the value of
the things taken. The agreement is void, as its
object is unlawful.
A agrees to sell his house to B against 100 kgs of
cocaine (drugs). Such agreement is illegal as the
consideration is unlawful.

6. 6. Not expressly declared to be void:
-either illegal or void.-prohibited by law.
- any legal effects.
Section 10 is not complete, there are certain
other sections which also contains
requirements for an agreement
Two Parties
Parties must intend to create legal
obligations: Social or domestic type of
agreements are not enforceable in court of
law

7. Balfour Vs. Balfour
Facts Of The Case
• Mr. Balfour and Mrs. Balfour were husband and wife from Sri
Lanka and they went for a vacation to England in the year 1915
• Mrs. Balfour fell ill - Mr. Balfour return to Ceylon and his wife, that
is Mrs. Balfour shall stay back until she recovers from her illness.
• They decided that during that period of time Mr. Balfour shall pay
Mrs. Balfour 30 pounds as maintenance every month .
• Now this understanding and interpretation was made when their
relationship was fine .
• But slowly and gradually their relationship deteriorated which
resulted in non- payment of the amount of maintenance by Mr.
Balfour to Mrs. Balfour
• But Mrs. Balfour decided to enforce the agreement and moved to
the court.

8. • Is the agreement between Mr. And Mrs. Balfour
valid in nature at all?
• Does the contract between husband and wife
enforceable in court of law?

9. • It was held that the agreement was purely
domestic in nature.
• when a husband and a wife enter into an
agreement they never intend to create a legal
relationship.
• Moreover, a court will never take into account the
domestic agreements between spouses made in
daily course of life..
• Wife could not recover as it was a social agreement

10. Written or spoken
Certainty- must be certain and not vague or
indefinite.
A agrees to sell to B a hundred tons of oil. There is
nothing certain in order to show what kind of oil
was intended for.
Possibility of performance
A agrees with B to discover treasure by magic. The
agreement cannot be enforced as it is not possible
to be performed.

12. Test your Knowledge
• All Contract is a/an ______________
a ) Offer b) Agreement
c) Acceptance d) Transaction
• In business agreements people intend to
enter in to ___________ relationship
a)Social b) Commerce c)
Legal d) all of the above

13. • A invited B for his sister marriage and B
accepts to attend. This is an example of
___________ Agreement
a ) Family b) Social
c) Legal d) None of the above

14. • Which of the following persons are not
competent to contract being the persons
disqualified by law ?
a). Alien enemies
b). Insolvents
c). Convicts
d). All of these

15. • The capacity to contract means
A. Willingness of the parties to enter into a contract
B. Intention of the parties to enter into a contract
C. Competence of the parties to enter into a valid
contract.
D. Certificate to enter into a valid contract