This document outlines the key elements of a valid contract according to Indian contract law. It discusses the definition of a contract, essential elements like offer and acceptance, capacity to contract, consent, and mistake. It provides definitions for key terms like proposal, agreement, consideration, free consent from coercion, undue influence and fraud. It also explains competence to contract and exceptions for minors, persons of unsound mind, disqualified persons, and more.

2. Contents
• Meaning of contract.
• Essentials of valid contract.
• Offer.
• Acceptance.
• Capacity to contract.
• Consent.
• Free consent.

3. According to Sec.2(h) of the Indian Contract Act "An
agreement enforceable by law is a contract”
According to Sec.2(e), every promise or set of
promises forming the consideration for each other, is
an agreement.

4. “All agreements are contracts but all
contracts are not agreements”
Contract= Agreement+ Enforceability at
Law
Agreement
Enforceability
at law
C
O
N
T
R
A
C
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5. • Offer and Acceptance.
• Intention to create legal relations.
• Free consent.
• Consideration.
• Capacity to parties.
• Lawful objects.
• Writing and registration.
• Certainty.
• Not expressly declared void.

6. Section 2(a) of the Indian Contract Act, 1872 defines a ‘proposal’
as,"When one person signifies to another his willingness to do or
to abstain from doing anything, with a view to obtaining the
assent of that other person either to such act or abstinence, he is
said to make a proposal"
The person who makes an offer is called “Offeror” or “
Promisor” and the person to whom the offer is made is called
the "Offeree” or “Promisee”.
Example Mr. A says to Mr. B, “Will you purchase my car for
Rs.1,00,000?”
In this case, Mr. A is making an offer to Mr. B. Here A is the
offeror andB is the offeree.

7. • There must be two parties.
• The offer must be communicated to the offeree.
• The offer must be certain, definite and not vague or
ambiguous.
• Offer may be express and implied.
• An offer may be specific or general.
• An offer can be made subject to any terms and
conditions.
• Two identical cross offers do not make a contract.

8. As per Section 2(b) of the Indian Contract Act,
“When the person to whom the proposal is made,
signifies his assent thereto , the proposal is said to be
accepted.”

9. •Acceptance must be given by a person to whom the offer is
made.
•Acceptance must be absolute and unqualified.
•Acceptance must be expressed in some usual and reasonable
manner.
•Acceptance must be communicated by the acceptor.
•Acceptance must be accepted after renewal.

10. Section 11 lays down that “Every person is competent to
contract who is of the age of majority according to the
law to which he is subject, and who is of sound mind ,
and is not disqualified from contracting by any law to
which he is subject.” Thus the section declares that a
person is incompetent to contract under the following
circumstances:
1. Minor
2. Unsound Mind
3. Disqualified Person.

11. Accordingto Indian Majority Act 1875“A person who is
under 18years of age is a minor.”
Minor’s Agreements
•Minor cannot be as partner if he is a partner he is just
entitled for the profits and not liable for any loss.
•Cannot rectify the contract entered at time of minority
even after attaining the age of majority.
•The rule of estoppels does not apply to a minor.
•Any agreement with minor is inoperative.
•Any contract for the benefit of minor is valid or legal.

12. Section 12 lays down that “Aperson is said to be of sound mind
for the purpose of making a contract if, at the time when he
makes it he is capable of understanding it and of forming a
rationaljudgment asto its effect upon hisinterests”.
Unsoundnessof mindmayarisefrom:
• Idiocy: An idiot is a person whose mental powers of
understanding even ordinary matters are absent because of lack
of development of the brain.
• Hypnotism: It also produces temporary incapacity till the
personis under the impact of artificially induced sleep.

13. • Drunkenness: It produces temporary incapacity till the
man is under the effect of intoxication creating absence of
mind.
• Lunacy: It is a disease of the brain. Alunatic loses the use
of his reason due to some mental disease. He can enter into
the contract during that period when heisof soundmind
• Mental Decay: It ison accountof oldage.

14. • Alien enemies: An alien (citizen of a foreign country) living in
India can enter into the contract with citizens of India during
peace time. Contracts entered into before the declaration of
war are either stayedorterminated.
• Insolvents: An insolvent cannot enter into a contract as his
property vests in the official receiver. This disqualification is
removed after heisdischarged.
• Corporations: Acorporation is an artificial person recognized
by law. It is competent to enter into acontract only through its
agents.

15. •Convicts: A convict is a person who is found guilty and is
imprisoned. During the period of imprisonment, a convict is
incompetent (a) to enter into the contract, (b) to sue on
contracts made before eviction.
•Married Women: A women is competent to enter into a
contract. Marriage does not affect the contractualy capacity of
a woman. She can even bind her husband in case of necessity. A
married woman may sue or be sued in her own name in respect
of her separate property.

16. According to Section 13 of Indian Contract Act
“When two or more persons are said to consent
when they agree upon the same thing in the same
sense.”

17. Section 14 lays down that “Consent is said to be
‘free’ when it is not caused by:
• Coercion(Section 15)
• Undue influence(Section 16)
• Fraud(Section 17)
• Misrepresentation(Section 18)
• Mistake(Section 20, 21 and 22)

18.  Undue Influence (Section 16)
A contract is said to be undue influence:
i. The relations subsisting between the parties are such
that one of the parties is in a position to dominate
the will of the other.
ii. he uses the position to obtain an unfair advantage
over the other.
Coercion is the committing or threatening to commit any
act which is unlawful or threatening to detain any property
of any person, with the intention of causing any person to
enter into an agreement.
 Coercion (Section 15)

19.  Fraud (Section 17)
Section 17 Fraud means that includes the following acts
committed by party:
1) The representation that it is true but in reality it is not
true.
2) The active concealment of a fact by a person who has
the knowledge of that fact.
3) A promise made without any intention to perform it.
4) Any other act to deceive.
5) Any act or omission which is fraudulent by the law.

20.  Misrepresentation (Section 18)
According to Section 18 ‘Misrepresentation’ means and
include:
1) Positive assertions of the unwarranted statements
believing that to be true.
2) Breach of duty which brings the advantage to the
person committing it by misleading the other.
3) Causing mistake about subject matter innocently.

21. Mistake (Section 20,21 and 22)
• Mistake is a misconceptionor error.
• Mistake meanserroneousbelief concerningsomething.
Mistake
Mistake of
Law
Law of the
country
Foreign
law
Mistake of
Fact
Bilateral
law
Unilateral
law

22. Mistake of Law (Sec. 21)
•Mistake of law of the country ~ such a mistake does not
make the contract voidable. The rule in this case is that
“Ignorance of lawisno excuse.”
•Mistake of foreign law ~ mistake of law of a foreign
country vitiates the contract and rendersit void.

23.  Mistake of Fact
• Bilateral mistake (Sec. 20) ~ where both the parties to an
agreement are under a mistake as to a matter of fact
essential to the agreement, the agreement is void.
• Unilateral mistake (Sec. 22) ~ A contract is not voidable
merely because it was caused by one of the parties to it
being under a mistake as to a matter of fact