Bus Iness Law B Com 2nd

ESSENTIAL ELEMENTS
OF
A VALID CONTRACT
By :-
Mohammad Iqbal Dar
Assistant Professor Commerce
Government Degree College Kulgam.
According to sec 2(h) of Indian Contract Act 1872 the
Contract is an agreement enforceable at law.
Agreement =Offer+Acceptance
Contract = Agreement + Enforceability at law.
An agreement, to be enforceable at law, must posses

the essential elements of a valid contract as contained
in section 10 of the Indian Contract Act 1872.
Only that agreements which are enforceable by law
are contracts.
All Contracts are agreements but all agreements are
not contracts.
ESSENTIAL ELEMENTS OF A VALID
CONTRACT
1. Offer and Acceptance.

In order to create a valid contract, there must be a
'lawful offer' by one party and 'lawful acceptance' of the
same by the other party.
Section 2 (a) of the Contract Act defines Offer as –
‘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 an offer'. Section 2 (b) of
the Contract Act states that, ‘when the person to whom
the offer is made signifies his assent there to, the offer
is said to be accepted.
2 Intention to Create Legal
Relationship.
In case, there is no such intention on the part of parties, there is
no contract. Agreements of social or domestic nature do not
contemplate legal relations. Case :- Balfour vs. Balfour(1919)
Mr. Balfour and his wife went to England for a vacation, and his
wife became ill and needed medical attention. They made an
agreement that Mrs. Balfour was to remain behind in England
when the husband returned to Ceylon (Sri Lanka) and that Mr.
Balfour would pay her £30 a month until she returned. This
understanding was made while their relationship was fine;
however the relationship later soured. The lower court found that
there was sufficient consideration in the consent of Mrs. Balfour
and thus found the contract binding, which Mr. Balfour appealed.
Arrangements made between husbands and wives are not
generally contracts as the parties do not intend to be legally
bound by the agreements.
3.Lawful Consideration.
At the desire of promisor, promisee or any other person has
done or abstain from doing or does abstain from doing such
act or promises is known as consideration. According to
Blackstone "Consideration is recompense given by the party
contracting to another." In other words of Pollock,
"Consideration is the price for which the promise of the
another is brought." Consideration is known as “quid pro-
quo” or something in return. It may be cash, kind, act or
abstinence and may be in past, present or future. It should
not be unlawful, immoral and against the public policy.
4. Competencyof The
parties./Capacity to contract.
The parties to an agreement must be
competent. If either of the parties does not have
the ability to contract, the contract is not valid. The
following persons are incompetent to contract. (a)
Minor: A person less than age of 18 is minor.
Case-Mohri Bibi vs Damodar Ghosh 1903 (b)
Unsound mind person: Any person who is unable
to understand the term and condition of contract at
the time of its formation is unsound mind. (c)
persons disqualified by law to which they are
subject.
5. Free Consent.
“Consent' means the parties must have
agreed upon the same thing in the same sense.
According to Section 14, Consent is said to be

free when it is not caused by- (1) Coercion
(Case- Rangnaykamma vs Alwar Setti 1889.)
(2) Undue Influence (3) Fraud (4) Mis-
representation (5) Mistake. An agreement should
be made by the free consent of the parties.
6. Lawful Object.
The object of an agreement must be valid.
Object has nothing to do with consideration. It means
the purpose or design of the contract. Thus, when
one hires a house for use as a gambling house, the
object of the contract is to run a gambling house. The
Object is said to be unlawful if- (a) it is forbidden by
law; (b) it is of such nature that if permitted it would
defeat the provision of any law; (c) it is fraudulent; (d)
it involves an injury to the person or property of any
other; (e) the court regards it as immoral or opposed
to public policy. Or any agreement to distribute the
money earned by robbery.
7. Certainty of Meaning.
According to Section 29,"Agreement the meaning of which is not
Certain or capable of being made certain are void.“ For e.g. : A agree
to sell to B a 100 tones of oil, there is nothing to show what kind of oil
intended, the agreement is void due to the absence of certainty. But if
A is dealer of coconut oil only agree to sell B,100 tones of oil, the
nature of A’s trade is sufficient to show the kind of oil, and this will be a
valid contract.
8. Possibility of Performance.
Condition for a contract should be capable for performance .If the act
is impossible in itself, physically or legally, if cannot be enforced at law.
For example: If A and B makes an agreement that if B encloses a
space with the help of two straight lines then A will pay him Rs. 1000
otherwise B will be liable for paying Rs. 500 to A. RESULT: This is an
impossible work. Two straight lines can not enclose a space , hence
contract is not valid.
9. Not Declared to be void or Illegal.
The agreement though satisfying all the conditions for a valid
contract must not have been expressly declared void by any law
in force in the country. Agreements mentioned in Section 24 to 30
of the Act have been expressly declared to be void. For example
agreements in restraint of trade, marriage, legal proceedings etc.
That is : If A is not willing to marry with B, law can not enforce
him/her.
10. Legal Formalities.
An oral Contract is a perfectly valid contract, expect in those
cases where writing, registration etc. is required by some statute.
In India writing is required in cases of sale, mortgage, lease and
gift of immovable property, negotiable instruments; memorandum
and articles of association of a company, etc. Registration is
required in cases of documents coming within the scope of
section 17 of the Registration Act 1908. All the elements
mentioned above must be in order to make a valid contract. If any
one of them is absent the agreement does not become a
contract.

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ESSENTIAL ELEMENTS

Contract = Agreement + Enforceability at law.

An agreement, to be enforceable at law, must posses

1. Offer and Acceptance.

According to Section 14, Consent is said to be

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