2. What is contract? 01
01
02
03
04
When a person signifies to another person
his willingness to do or to obtain from doing
anything with a view to obtain the consent of
that other he is said to make a proposal
When the person to whom the proposal is
made signifies or expresses his consent the
proposal is said to be accepted and the
proposal thus accepted becomes a promise
Every promise or a set of promises, which
forms some consideration for each other, is
known as an agreement
Contract word is derived from Latin word
“contractum”, which is an agreement which
can be enforced by law
3. Elements of a valid contract 02
Lawful
subject
matter
4. Lawful subject matter 03
It is quite obvious that the
court shall not enforce an
agreement which violates
the provisions of the laws
framed by the law-making
bodies or which is against
the established public
policy or which has adverse
effects on the morals of the
society as a whole.
The object is said to be unlawful if:
• Contracts involving fraud, crime, pure
gambling, etc.
• Construction of building without getting its
plan approved by the proper local authority
concerned
• Construction of a dam prior to the
acquisition of the land to be flooded by its
construction
• A contract in which the arrangement by
various contractors is made not to compete
and thus to create a monopoly
5. Lawful subject matter 04
A person cannot escape from the responsibility by simply stating that he entered into the
contract unknowingly
Following are some accepted grounds of public policy:
An Indian national cannot trade with an alien enemy without the permission of
government.
Agreements for stifling prosecution, i.e. anybody’s crime cannot be converted into a source
of profit
Agreement to vary the periods of limitations as prescribed by the law of limitations
Interference with court of justice
6. Legally competent parties 05
The parties entering
into contract should
be legally competent.
If either of the parties
does not have the
ability to contract,
the contract is not
valid.
Minors- a person under
the age of 18 is minor.
Idiots and lunatics- any
person who is unable to
understand the terms
and condition of
contract at the time of
its formation is unsound
mind
Drunken person- it is
possible that the
contracts made by
intoxicated person and
lunatics may be treated as
valid, if its in the opinion
of the court.
7. It is an essential element
for formation of a valid
contract. A contract is
void without
consideration. An
agreement without
consideration is valid if it
satisfies the following
points:
The contract must be in
writing
Itmustberegistered
accordingtothelawof
registrationofthe
documents
It must be between the
parties standing in near
relation to each other
Itshouldproceedoutof
naturalaffectionbetween
theparties
Valid consideration 06
8. Free consent 07
Free 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;
Mistake: Misrepresentation: Coercion: Undue influence:
• Mistake of law
• Mistake of fact –
mistake should be
part of both the
parties
A false representation
made innocently without
any intention of
deceiving the other party
It means any action
which is prohibited or
forbidden by the Indian
penal code. Hence, any
contract executed under
coercion will be
declared as void
It is the improper use of any
power possessed over the
mind of contracting party.
Contract is affected by
undue influence when:
• That one of the parties
was in a commanding
position to dominate the
will of the other
• That the transaction was
unfair and
unconscionable
9. Provisions of law with regard to form 08
The law requires that certain types of contracts must be in writing and signed by the
parties concerned so as to facilitate the process incase of disputes. Practically all
construction contracts are in writing. But since there are many complex services to be
performed, the written agreement normally includes following:
Scope and nature of the services to be
performed
Consideration in respect of performance of
such services
Time limit of completion of work
Signatures of the parties
10. Conclusion 09
Voidable- not binding
to one or other of the
parties and hence the
contract can be avoided
by injured party
Void- without any legal
effect and thus, not
binding to either of the
party concerned
Unforceable- unlawful
contract or contract
valid in itself but
cannot be proven in a
court of law and thus,
cannot be made
binding legally
We have studied the 5
essentials
requirements of
elements of a contract
and if it is proved that
the contract was
lacking in any one of
these requirements it
becomes: