The document outlines the essential elements of a valid contract: 1. There must be an offer and acceptance, forming an agreement between two parties. 2. The agreement must have lawful consideration, where both parties receive something of value. 3. For the agreement to be enforceable and considered a legal contract, it must also meet additional requirements - it must have lawful purpose and intent to create legal obligations, all parties must have capacity and provide free consent, terms must be clear and certain, and performance must be possible.

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Chapter 3
Essential Elements of Valid Contract

2. ESSENTIAL OF A VALID CONTRACT
AGREEMENT
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 A person makes a proposal (Offer). When it is
accepted by other, it becomes a promise
(Acceptance).
 Thus, Offer + Acceptance = Promise
 Only a mutual promise forming consideration
for each other is ‘agreement’. Thus, Promise +
Consideration = Agreement

3. CONTRACT
= AGREEMENT + ENFORCEABILITY
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 “An agreement enforceable by law” is
Contract. - Section 2(h)
 There must be legal relationship.
 Agreements of social or domestic nature are not
contracts.
 Examples:
 Invitation to a Birthday party
 Invitation to a Dinner etc

4. Promisor & Promisee
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 The promisee is the person receiving the
promise from the Promisor. The promisee is
the person who has been promised
something, as opposed to the Promisor who
makes the promise to someone.

5. ESSENTIAL OF A VALID
CONTRACT
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 1. Proper offer and its acceptance
2. Lawful object
3. Agreement not expressly declared void
4. Intention to create legal relationship.
5. Free Consent
6. Capacity of parties to contract
7. Certainty of meaning.
8. Possibility of performance.
9. Lawful consideration
10. Legal formalities

6. ESSENTIAL OF A VALID CONTRACT
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ESSENTIAL OF A
VALID CONTRACT

8. Offer and acceptance
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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.

9. Intention to Create Legal Relations
 Agreements which create legal relations or are capable of
creating legal relations are contracts, for example, an
invitation to a dinner does not create any legal relation and
therefore is not a contract.
 Husband & Wife Agreements
The courts consider domestic arrangements between
husband and wife to be social agreements and not legally
enforceable: Balfour v Balfour.

10. CONSIDERATION =SOMETHING IN
RETURN
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 When, at the desire of the promisor, the
promisee or any other person
 has done or abstained from doing (PAST), or
 does or abstains from doing (PRESENT), or
 promises to do or to abstain from doing, something
(FUTURE),
 such act or abstinence or promise is called a
consideration for the promise. -Section 2 (d)
 A promise without consideration is not
‘agreement’

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Capacity of parties
 The parties to an agreement must be
competent to contract. If either of the
parties does not have the capacity to
contract, the contract is not valid.
According the following persons are
incompetent to contract.
(a) Minors,
(b) Persons of unsound mind, and
(c) persons disqualified by law to which
they are subject.

12. Free consent
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 Two or more persons are said to
consent when they agree upon the
same thing in the same sense. (Section
13)

13. Free consent
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Consent of both parties must be free.
Consent is said to be free when it is not caused by
(1) coercion, as defined in section 15
(2) undue influence, as defined in section 16
(3) fraud, as defined in section 17
(4) misrepresentation, as defined in section 18
(5) mistake, subject to the provisions of sections
20, 21 and 22.

14. Lawful object
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The object for which the contract has been
entered into must not be fraudulent or illegal or
immoral or opposed to public policies.

15. Possibility of performance.
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If the act is impossible in itself, physically
or legally, if cannot be enforced at law.
For example, Mr. A agrees with B to
discover treasure by magic. Such
Agreements is not enforceable.

16. Certainty of Terms
The terms of a contract should be clear.
In other words, the contract must not be
vague. Contracts which are vague
cannot be enforced.

17. AGREEMENTS NOT DECLARED EXPRESSLY
VOID
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There are Certain agreements which
have been expressly declared void by
the law. Thus an agreement made by
parties should not fall in this category.

18. Legal Formalities
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Oral contract is a valid contact. However the
contract must be in writing and registered, if so
required by any law, for example, gift,
mortgage, sale, lease under the Transfer of
Property Act 1882, Memorandum and Articles
of Association of a Company under the Indian
Companies Act

19. Thank You
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