Essential Elements of A Contract

Essential elements of a contract
Contract is basically a bargain between two parties, each receiving something of value or
benefit to them. This something is described in law as consideration. Consideration is an
essential element of a valid contract. It is the price for which the promise of the other is
bought. A contract without consideration is void. The consideration may be in the form of
money, services rendered, goods exchanged or a sacrifice which is of value to the other party.
Indian contract act 1872(2) section provides that:

An agreement which is legally enforceable by law is a contract. Agreements which are not
legally enforceable are not contracts void agreements which are not enforceable at all or as
voidable agreements which are enforceable by only one of the parties to the agreement. All
contracts are agreements, but all agreements are not contracts.
An agreement becomes enforceable by law when it fulfills certain condition. This condition is
the essential element of contract and these are giving below
1. Parties to contract
2. Lawful offer and acceptance
3. Lawful consideration
4. Intention to create legal relation
5. Legal capacity
6. Free consent
7. Legality of the object
8. Lawful purpose and object
9. Possibility of performance:
10. certainty
11. Void agreement
12. Formalities
Parties to contract: There must be two or more parties to make a contract.
Offer and Acceptance:

When one person signifies to another his willingness to do or 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.
The first step towards creating a contract is that one person shall signify or make a proposal or
offer to the other, with a view to obtaining the acceptance of that another person to whom the
offer is made. A proposal when accepted becomes a promise.
When the person to whom the proposal is made signifies his assent there of the proposal is said
to be accepted. A proposal when accepted becomes a promise.
Lawful Consideration:
When at the desire of the promisor the promisee or any other person has done or abstained from
doing, or does or abstains from doing or promises to do or to abstain from doing something such
act or abstinence or promise is called a consideration for the promise.
Every contract consists of two parts - (1) Promise and (2) Consideration for the promise. A
promise is often made in return for a promise for example a buyer realizes the goods for the
price. Price for goods is therefore, consideration here.
Intention to create legal relations
A contract does not exist simply because there is an agreement between people. The parties to the
agreement must intend to enter into a legally binding agreement. This will rarely be stated
explicitly but will usually be able to be inferred from the circumstances in which the agreement
was made. For example, offering a friend a ride in your car is not usually intended to create a
legally binding relation. You may, however, have agreed with your friend to share the costs of
travelling to work on a regular basis and agree that each Friday your friend will pay you $20 for
the running costs of the car. Here, the law is more likely to recognize that a contract was entered
into. Commercially based agreements will be seen as including a rebuttable intention to create a
legally binding agreement.
Legal capacity
Not all people are completely free to enter into a valid contract. The contracts of the groups of
people listed below involve problematic consent, and are dealt with separately, as follows:
people who have a mental impairment;

young people (minors);
bankrupts;
corporations (people acting on behalf of a company); and
prisoners.
Free consent: To make contract it is essential that the consent of the parties to enter in to the
contract is free. Here free consent means the consent which is not affected by coercion, undue
influence, mistake, misrepresentation, and fraud.
Legality of the object:
The object for which the agreement has been entered into must not be illegal,or immoral or
opposed to public policy
Certainty:
The terms of a contract should be clear. In other words, the contract must not be vague. Contracts
which are vague cannot be enforced.
Possibility of performance:
Contracts based on impossibility of performance are not valid. The contracts must be capable of
being performed.
Void agreement :
A contract must be a form which is not declared as void with any relevant loss.
Formalities:
A contract may be writer or oral and registered or none registered according to the provision of
relevant to loss.
Consideration is an essential part of contract. Exceptions to the Rule, No Consideration,

No Contract
No Consideration, No Contract
Consideration being one of the essential elements of a valid contract the general rule is that an
agreement made without consideration is void. But there are a few exceptions to the rule,where an
agreement without consideration will be perfectly valid and binding. These exceptions are as
follows:
1.Natural love and affection [Sec. 25(1)]

An agreement though made without consideration will be valid if it is in writing and
registered and is made on account of natural love and affection between parties standing in a near
relation to each other. An agreement without consideration will be valid provided(a) it is expressed in writing;
(b) it is registered under the law for the time being in force;
(c) it is made on account of natural love and affection;
(d) it is between parties standing in a near relation to each other.
All these essentials must be present to enforce an agreement made without consideration.
2. Compensation for services rendered [Sec. 25(2)]

An agreement made without consideration will be valid if it is a promise to compensate
wholly or in a part a person who has already voluntarily done something for the promisor or
something which the promisor was legally compellable to do.To apply this rule, the following
essentials must exist:
(a) The act must have been done voluntarily;
(b) for the promisor or it must be something which was the legal obligation of the promiser;
(c) the promisor must be in existence at the time when the act was done;
(d) the promisor must agree now to compensate the promisee.
3. Time-barred debt [Sec. 25(3)]
A promise to pay a time-barred debt is also enforceable. But the promise must be in
writing and be signed by the promisor or his agent authorized in that behalf. The promise may be
to pay the whole or part of the debt. An oral promise to pay a time-barred debt is unenforceable
4. Completed gifts [Exp. 1 to Sec. 25]

Explanation 1 to section 25 provides that the rule 'No consideration, No contract' shall not
affect validity of any gifts actually made between the donor and the donee. Thus if a person gives
certain properties to another according to the provision of the Transfer of Property Act, he cannot
subsequently demand the property back on the ground that there was no consideration.
5. Agency (Sec. 185)

There is one more exception to the rule. IT is given in section 185 which says that no
consideration is needed to create an agency.

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Essential elements of a contract

Indian contract act 1872(2) section provides that:

Offer and Acceptance:

people who have a mental impairment;

Consideration is an essential part of contract. Exceptions to the Rule, No Consideration,

1.Natural love and affection [Sec. 25(1)]

2. Compensation for services rendered [Sec. 25(2)]

4. Completed gifts [Exp. 1 to Sec. 25]

5. Agency (Sec. 185)

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