The Essential Elements Of A Valid Contract

Essen Elements of a Valid Contract

The Essential Elements Of A Valid Contract

The Indian Contract Act of 1872 holds an exemplary role with respect to codifying principles that are responsible for governing a “contract.” An agreement that is identified to be legally enforceable is known to be a contract. Having mentioned the same, it would however be imperative to mention that while all contracts are perceived to be agreements, all agreements on the other hand are not contracts. A contract can either be a written agreement or an oral agreement. 

Simply put, the sheer aspect of a valid contract implies the coming together of two parties who put into writing an agreement that vividly defines specific obligations, that are performed by the mentioned parties, wherein the contract is regarded to be valid while taking into consideration the enforceability of the written agreement.

For instance, when A and B venture into an agreement in which A proposes to buy a car from B for a sum of ₹1,00,000 in which the latter accepts A’s proposal, the agreement would thereafter be regarded as a contract that is enforceable in law. 

The Prerequisites Of A Valid Contract: An Introspection On Section 10 Of The Indian Contract Act, 1872

Section 10 of the Indian Contract Act, 1872 holds an imperative role with respect to providing for the essentials of a valid contract. They can be elucidated under the following:

  • The sheer intention to form a legal obligation through the presence of offer as well as acceptance.
  • The free consent of both the parties is a prerequisite.
  • The very capacity or competency of the parties to enter into a contract is a must. 
  • There should also be the presence of lawful consideration and lawful object.
  • It is crucial that such an agreement must not in any way, be expressly declared as void. 

An Elaboration On The Important Elements Of A Valid Contract

Offer

The first vital element of any valid contract is the existence of an offer which has been elucidated under Section 2(a) of the Indian Contract Act, 1872 wherein it is necessary that such an offer be accepted. When one brings into consideration, the applicability of Section 2(a) of the Indian Contract Act, an offer or a proposal is usually defined as the following:

‘’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 to such act or abstinence, he is said to make a proposal.’’

Having mentioned the same, an individual making a particular offer is described as an ‘’offeror’’ and the individual to whom such an offer is made is described as an ‘’offeree.’’ The very existence of such elements bring into consideration the formation of various legal obligations, which culminate to a moral duty being formed on the individual who offers or promises to do something.

Acceptance

Section 2(b) of the mentioned Act holds an important role with regard to elaborating on the concept of acceptance wherein the individual to whom such a proposal has been made gives his/her consent to such an offer. According to Section 2(b) of the Indian Contract Act, 1872 the sheer concept of acceptance implies a circumstance, ‘’when the person to whom the offer was made, has given his assent to such an offer.’’ Having said that, Section 4 of the Indian Contract Act, 1872 stipulates that acceptance is considered to be completed when there is a clear communication of the same to the parties involved. 

For instance,If A wants to sell his house to B for a sum of ₹70 lakhs and B, insteads shows his intention to buy the same for ₹50 lakhs, this will not amount to acceptance of the mentioned offer, as there is a clear condition imposed on the offeror. 

Free Consent

The second vital element can be regarded as the “consent” of both the parties. Free consent, in this particular context, implies the approval and knowledge of the concerned parties. The aspect of free consent can be analyzed as an identity of minds which is based on the understanding of the concept, known as “consensus-ad-idem” wherein it is crucial that the idea of free consent is not controlled by various aspects of undue influence, coercion, fraud, mistake or misrepresentation which has been described under Section 14 of the Indian Contract Act, 1872. In circumstances, where the consent of any concerned party is not perceived to be free, the contract is seen as voidable at the discretion or option of any party. 

Illustration: For instance, if A threatens to shoot B if there is a possibility of B not lending A ₹2000, and B agrees to the same. Then in such a case, the agreement entered into under the element of coercion will be declared as voidable at the discretion of B. 

Capacity and Competency Of Parties

The third valid element of a contract introspects on the capacity and competency of parties which has been elaborated under Section 10 and 11 of the Indian Contract Act, 1872.

The prerequisites pertaining to the incompetency of parties have been elucidated under the following:

  • an individual who has not yet attained or acquired the age of majority,
  • a person who is not of sound mind,
  • a person who is not qualified to verge into a contract with respect to any law of which he/she is a subject.

Lawful Consideration

The fourth necessary element is based on the necessity of a lawful “consideration.” Consideration, in this particular context can imply compensation for omitting to do a deed or act. It is also identified as a “quid pro quo” viz which can be translated as something in return for another object. Such a form of consideration is acknowledged as a lawful consideration. 

Illustration: For instance, if A agrees to sell off his books to B for a sum of ₹100, and B ensures to pay the specified amount, then the same would be regarded as an example of lawful consideration. 

Lawful Object

The last important element to clinch a particular contract is that the agreement which has been ventured into must not be based on a law which declares the same to be void or illegal. Section 23 of the Indian Contract Act of 1872 holds a crucial role with respect to elaborating on the same. https://lexforti.com/legal-news/contingent-contracts/

For instance, A, B and C venture into an agreement and agree to take future business profits of the same which was in actuality, acquired by fraud. The mentioned agreement would be declared as void because the mentioned object would be declared as unlawful. 

The Role Of The Judiciary In Deliberating Upon The Validity Of A Legal Contract

There have been various judgements that have introspected on the validity of a legal contract. It would be important to mention the case of Mohori Bibee v. Damodar Ghose, wherein the defendant was a minor and was also the owner of his property. While his mother was his legally appointed guardian, it was seen that a moneylender by the name of Brahmo Dutt had through the support of his agent lent a sum of ₹20,000 at an interest of 12 percent. The loan was eventually taken by the defendant after mortgaging his property, post which it was notified by the defendant’s mother that he was a minor. It was later held by the Hon’ble Court that any agreement ventured into by a minor can be regarded as a void ab initio. 

It would be imperative to take into cognizance the case of Lalman Shukla v. Gauri Dutt, wherein the Hon’ble Court observed and held that there must be a communication of acceptance by both the parties, wherein it is further required of the contract that it be an agreement. 

In the case of Chickam Amiraju v. Chickam Sheshamma, when the subject matter of the case dealt with a husband threatening to commit suicide if there was no execution of a release deed by his wife and son in favour of his brother, it was held that the very threat to commit suicide results to coercion described under Section 16 of the mentioned Act. 

It would also be pertinent to take into consideration the case of MP Sugar Mills Co. Ltd. v. State of Uttar Pradesh, wherein the elements pertaining to the doctrine of promissory estoppel have been adequately described by the Hon’ble Supreme Court, in which it was stipulated that in circumstances where one party in equivocal and clear words alongside conduct, promises to do something which is with respect to creating legal obligations, in that case such a promise would be considered to be binding on the promisor, wherein the said party, cannot, under any circumstances, go back on it, and is thereby obligated to act on it.

Furthermore, in the case of J.K. Industries v. Mohan Investments and Properties Pvt. Ltd. the Hon’ble Court held that there should be the existence of a prior condition that brings into consideration a written contract between each of the parties. In circumstances, where there is the absence of a written contract, it cannot be presumed that the contract was not executed.

Conclusion

It is therefore essential to fulfill the mentioned principles in a particular contract, failing which the concerned contract would be declared as void. It is imperative that parties venturing into any contract ensure that the terms stipulated under such a contract are in agreement with the respective parties. These are the most crucial and elementary principles with regard to the elements of a particular contract, which if witnessed to be fulfilled, may however be subject to various conditions that are usually laid down by any particular law, or by taking into regard, the specific types of a contract.

1280 675 Debarupa Biswas
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Debarupa Biswas

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