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Essentials of a Valid Contract

In order to understand the essentials of a valid contract it is first necessary to understand the certain significant terms like the word Contract¯ has been defined under Section 2(h) of The Indian Contract Act, 1872 which says that an agreement which is enforceable by law is said to be a contract. A contract which is enforceable by law is said to be a valid contract and an agreement¯ has been defined under Section 2(e) of the Indian Contract Act, 1872 which says that every promise as well as every set of promises which is forming the consideration for each other is said to be an agreement.

An agreement has to follow certain essential conditions to be enforceable at law and all those important conditions are called as an essential of a valid contract. If we look at the provisions of Section 10 of The Indian Contract Act, 1872 it says that all agreement is said to be contract if they are done with free consent of the parties that means the parties who are competent to the and contract should be done with the lawful consideration as well as with lawful object and the contract should not be expressly declared to be void.

The certain essential conditions which are required for the creation of a valid contract are as follows:
  1. Offer and acceptance: According to the section 2(a) of the Indian Contract Act, 1872 signifies that a proposal is said to be made:
    • when one person signifies his willingness,
    • with a view of obtaining an assent and
    • other two such an act or abstinence.

      These above three are the important elements required for an offer to be made. In an agreement there must be plurality of persons that is one party who is making the offer and the other party accepting it. The terms of the offer must be definite and unambiguous and it should be certain as it is said that when the terms of the contract are not definite then its acceptance cannot create any legal relationship. The acceptance of the offer must be absolute as well as unconditional and the terms of the offer should be definite. The acceptance of the offer must satisfy the essential requirements for a valid acceptance like acceptance should be made in a reasonable manner and it should be communicated by the offeree to the offeror.

      Case: Lalman Shukla v Gauridutt 1913 Allahabad High Court.
      In this case defendant's (Gauridutt) nephew has absconded from Gauridutt's house. In this case it was held by the court that when the Lalman Shukla(servant) had found the missing boy he was having no knowledge about the offer hence there is no question reward if a person is having knowledge about the offer and then is acting accordingly with the terms then it amounts to acceptance of the offer otherwise not.

      Case: Union of India v M/s Uttam Singh Dugal and Co. Pvt. Ltd AIR 1972 Del: In this case Delhi High Court held that in respect to any material term when there is variance between the offer & acceptance and when the agreement if is absolute then it will not result in the formation of a valid contract.
       
  2. Intention to create legal relationship:
    Whenever two parties are entering into an agreement then there should be an intention of the parties to create legal relationship between them. It is said that there is no contract between the parties until and unless there is no intention to create legal relationship.

    Case: Rose & Frank Co v J.R. Crompton & Bros 1923 KB
    In this it was held that for creating a contract there must be a common intention of the parties who are entering into the contract.

    Case: Balfour vs Balfour 1919 KB
    In this case the husband was sued by his wife for not fulfilling the promise he made to his wife and the court held that there being no intention to create legal relationship the husband. In this case was held that husband is not liable as the matter which was following under this case was the matter of domestic agreements where usually the parties are not having intention to create legal relationship.

    Hence, it is required that offer must be such as in law which is capable of being accepted and it give rise to legal relationship. Mostly in the commercial agreement it is usually assumed that the parties are having intention to create legal relations. Generally, in domestic and social agreement there is no intention of the parties to create legal relationship but in commercial agreements it is said that there is an intention to create legal relationship between the parties in the contract.
     
  3. Lawful consideration:
    Consideration is one of the important essential of a valid contract and the consideration has been defined under section 2(d) of the Indian Contract Act, 1872 and the definition of consideration is signifying that there are certain essential conditions which has to be satisfied in order to make a valid consideration in forming a valid contract like consideration should be given at the desire of the promisor and it should be given by the promisee or any other person and definition of consideration given in the Indian contract Act, 1872 also signifies that consideration may be past present or it can be future and for the promise there should be some act, abstinence or promise by the promisee which is constituting consideration. It is not necessary that consideration be in cash or kind but it must be real and must be lawful.

    Case: Durga Prasad v Baldeo 1880 All. 221
    In this case it was held that consideration given for the promise must be moved by the desire of the promisor it should not be moved by some other person and the promise given by some other person was held to be not a sufficient consideration to support the promise.
     
  4. Parties to be competent to contract:
    The parties who are entering into contract must be competent to contract which means that according to Section 11 of the Indian Contract Act, 1872 every person who has attained the age of majority and the person who is of sound mind and the person who is not disqualified by any law from contracting to which he is subject then that person is said to be competent to contract.

    Case: Mohori Bibee v Dharmodas Ghose 1903 I.A.: In this case it was held that the contract with minor is void-ab-initio that is void from the very beginning as because a minor is incompetent to contract.

    Case: Kunwarlal v Surajmal AIR 1963 Madhya Pradesh: In this case it was held that necessities supplied to minor can be recovered.
     
  5. Lawful object and free consent:
    According to the provisions of Section 23 of the Indian Contract Act 1872 it clearly says that object of the agreement must be lawful it must not be against the public policy and should not be immoral and fraudulent, etc.

    And according to the provisions of Section 14 of the Indian Contract Act 1872 free consent has been defined which says that consent of the parties should be free from coercion which is defined under Section 15, undue influence which is defined under Section 16, fraud which is defined under Section 17, misrepresentation which is defined under Section 18 and mistake subjected to the provisions prescribed under Section 20, 21 and 22 of the Indian Contract Act, 1872. Where the consent of the parties to the contract are not free then the contract is not said to be a valid contract.

    Example: A, was a woman and she was suffering from some disease and B being his medical attendant undue influenced her to form a contract and to pay him an unreasonable sum for his professional services otherwise B will disclose that A is suffering from disease to everyone so here the contract is not a valid contract as the consent taken is not free as B employs undue influence on A.

    Case: Chikkam Ammiraju v Seshamma 1917 Mad.
    In this case it was held that the threat of committing suicide is amounting to coercion within the meaning of Section 15 of the Indian Contract Act 1872 and the consent is not set to be free when the consent is taken by coercion.

    Case: Derry v. Peek 1889 App Cas
    In this case it was held by the Court that when a false representation has been made knowingly or recklessly careless whether it is true or false and without belief in its truth then fraud is said to be proved.
     
  6. Agreement not declared void and necessary legal formalities:
    By the law in force in the country the agreement must not have been expressly declared void. A contract can be performed by spoken words or written however it is depending upon the interest of the parties that whether the contract should be in writing or oral and in order to make an agreement to be legally enforceable there are some other formalities which has to be complied with as when there is statutory requirement given that the contract should be made in the presence of witnesses and it has to be registered and must be in writing then at that time the requirement of that statutory formalities has to be fulfilled.
     
  7. Consensus-ad-idem:
    Consensus-ad-idem means meeting of minds this is one of the essential requirement when the agreement is formed for creating a valid contract. As Consent has been defined under Section 13 of the Indian Contract Act, 1872 which clearly says that consent is said to made when two or more persons are agreeing upon the same thing in the same manner or same sense. This Consensus-ad-idem signifies that when the parties are entering into an agreement then they must agree upon the subject matter of the agreement in the same sense and when there is no meeting of minds that the contract is said to be not a valid contract.
Example: A Contracts with B and A said to B that he wants a book of Constitutional law but A hadn't disclosed to B of which author he wants and after forming the contract accordingly B gives to A book of Constitutional law but of another author which A doesn't want. Firstly, the subject matter of the contract was not clear and here the contract between A and B is not a valid contract because there was no meeting of minds as A wants a book of another author but B sent him a book of another author. So, for a valid contract there must be Consensus-ad-idem existing between the parties.

Case: Raffles v. Wichelhaus 1864 EWHC: In this case it was held that when there is no consensus-ad-idem existing then there is no contract existing.

Conclusion:
To conclude it can be said that contract is an agreement as per Section 2(h) of the Indian Contract Act, 1872 which is enforceable by law. For a valid contract there must be plurality of persons that is one party who is making the offer and the other party accepting it and whenever the parties are entering into the Contract then they must disclose all the relevant to the facts and they should not deceive intentionally the terms and conditions of the contract.

Therefore, for a valid contract there must be an agreement and that agreement should be based upon the free consent of the parties to the contract and there must be lawful consideration as well as the object should be lawful and parties who are entering into the contract they must be competent to enter into the contract and when the consent is not free then the contract is said to be voidable at the option of the party whose consent was not freely taken. Thus, for creating a valid contract certain essentials have to mandatorily followed otherwise if not followed then the contract is not a valid contract.

Written by: Pooja - BA.LLB (Hons.), IMS Unison University, Dehradun

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