The document discusses the essential elements of a valid contract, including: offer and acceptance, lawful consideration, capacity and consent of the parties, legality of the contract terms, certainty, and possibility of performance. It provides definitions and examples for each element. Key requirements for a valid contract are an offer and acceptance, consideration between the parties that creates a legal obligation, lawful capacity and consent without coercion, a legal purpose, and terms that are clear and possible to fulfill.

1. Elements of a Contract
BUSINESS LAW
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

2. How a contract is formed
PROPOSAL
PROMISE
AGREEMENT
CONTRACT
+ ACCEPTANCE
+ CONSIDERATION
+ ENFORCEABILITY
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

3. S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

4. Essential Elements of a Valid Contract
Essential
Elements
of
a
Valid
Contract
Offer and Acceptance
Legal Relationship
Lawful Consideration
Capacity of the Parties
Free Consent
Legality of the object
Legal Formalities
Certainty
Possibility of performance
Not expressly declared void
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

5. 1. Offer and Acceptance
 Offer (proposal) must be Lawful
 It must be made with a view to obtain the consent of the other
party
 It must be certain
 It must be capable of performance
 It must have an intention to create legal relations
 Acceptance must be Lawful
 For example, Raju proposed to Samuel to sell his house for
Rs.50,00,000 . Samuel accepted the offer. There was a deal.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

6. 2. Legal Relationship
 There must be an intention of the parties to create legal
relationship
 For example, an agreement to dine at a friend’s residence does
not require a legal relationship.
 But, agreement to buy or sell goods OR to entrust a bike to a
mechanic for repairs come under legal relationships.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

7. 3. Lawful Consideration
 An agreement to do something for nothing is not enforceable by
law.
 That something given or taken is technically called a
consideration.
 It is the necessary evidence required by law of the intentions of
the parties to create a legal relationship.
 It may be an act (doing something) OR forbearance/abstinence
(not doing something) OR a promise to do not to do something.
 For example, Raju proposed to Samuel that he is selling his
house for Rs.50,00,000 and if Samuel wants to buy. Samuel
accepted the offer. There was a deal.
 Here, Rs. 50,00,000 is the consideration for Raju and house is
the consideration for Samuel.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

8. 4. Capacity of the Parties
 Parties should be legally capable of entering into an agreement.
 Incapacity may arise from
 minority,
 lunacy,
 idiocy,
 drunkenness, etc.
 For example, a contract cannot be enforceable by law if it is
between a major person and a minor person.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

9. 5. Free Consent
 Free and genuine consent (willingness) of both the parties
 Should have same mind on the same subject matter
 An agreement should not be entered into due to,
Coercion
Undue influence
Mistake
Misrepresentation
Fraud
 For example, a contract may not be enforceable by law if it is
entered into by forcing or coercing a party to the agreement.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

10. 6. Legality of the object
 Objective of the agreement should not be
Illegal or
Immoral or
Opposed to public policy
 For example, Gopal sold liquor without license to Ramu
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

11. 7. Legal formalities
 Formalities of writing, registration, etc.
 In India, writing is required in cases of
Lease
Gift
Sale
Mortgage of immovable property
Negotiable instruments
Memorandum of understanding
Articles of association of a company, etc.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

12. 8. Certainty
 Agreements must not be vague or uncertain
 It must be possible to ascertain the meaning of the agreement,
otherwise the agreement becomes void
 For example, a promise to appoint Mr. Surendar as the Head of
Operations of a company some time next year.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

13. 9. Possibility of Performance
 An agreement to do an act impossible in itself, physically or
legally, is void.
 For example, a promise to bring 5 Kg of gold from the sun for
Rs. 5000.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

14. 10. Not expressly declared void
 An agreement must not have been expressly declared to be void
by either of the parties
 For example, an agreement in restraint of marriage, an
agreement in restraint of a trade, etc.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

15. THANK YOU FOR LISTENING
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM