Topic#2

Essentials of a valid contract

LL.B Part II
Law of Contract
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OUTLINE
1. Introduction
2. Relevant Provision
3. Essential elements of a valid contract
4. Capacity to Contract
1. Age of majority
2. Sound mind
3. Not disqualified by law
5. Free Consent
1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake
6. Lawful Consideration and object
7. Not to be Void Agreement
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8. Conclusion
Introduction
For an agreement to be considered a valid contract under the Pakistani
Contract Act, 1872, it must meet certain essential elements. Firstly, there
must be an offer and acceptance, which means one party makes a
proposal and the other party accepts it. Secondly, the parties involved
must have the intention to create legal relations, implying that they are
serious about the agreement and it is not merely a social or domestic
arrangement. Thirdly, there must be lawful consideration, meaning
something of value is exchanged between the parties. Additionally, the
contract must be for a lawful object, meaning the purpose of the
agreement must be legal and not against public policy. Furthermore, the
parties must have the capacity to contract, which includes being of the
age of majority, of sound mind, and not disqualified from contracting by
any law to which they are subject. Lastly, free consent of the parties is
essential, meaning the agreement should not be induced by coercion,
undue influence, fraud, misrepresentation, or mistake. Without these
elements, a contract cannot be enforced by law. 3
Relevant Provision
Section 10:
All agreements are contracts if they are made by the free
consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby
expressly declared to be void.

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Essentials of a Valid Contract
1. Capacity to Contract
2. Free Consent
3. Lawful Consideration and object
4. Not to be Void Agreement

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Capacity to Contract
• Capacity to contract is a fundamental requirement for a valid
agreement. According to Section 11 of the Pakistani Contract
Act, 1872, the following are key aspects of the capacity to
contract:
1) Age of Majority
• A person must be of the age of majority to enter into a
contract. According to the law, this age is typically 18 years. If
a person is below this age, they are considered a minor and
thus incapable of contracting. For example, if a 16-year-old
tries to sell his bicycle through a contract, that contract would
not be valid because he is not of the age of majority.

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Capacity to Contract
2. Sound Mind
• To form a valid contract, a person must be of sound mind at
the time of making the contract. As per Section 12, a person is
considered of sound mind if they are capable of understanding
the contract and making a rational judgment about its effect
upon their interests. For instance, a person suffering from a
severe mental disorder at the time of making a contract is not
deemed capable of understanding its terms, and therefore,
the contract would not be valid.

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Capacity to Contract
3. Not Disqualified by Law
• Certain individuals are disqualified from contracting due to
specific legal restrictions. These may include individuals who
are declared insolvent, alien enemies, or convicts. For
example, if a person is declared bankrupt by the court, they
cannot enter into a contract because their capacity to contract
is restricted by law.

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Free Consent
• Free consent is a cornerstone of any valid contract. According
to the Pakistani Contract Act, 1872, consent is said to be free
when it is not caused by coercion, undue influence, fraud,
misrepresentation, or mistake. If the consent of any party to
the contract is not free, the contract may be voidable at the
option of the party whose consent was so caused. Ensuring
free consent is crucial as it ensures that all parties willingly and
knowingly enter into the agreement, which forms the basis of
a fair and enforceable contract.

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Free Consent
1) Coercion
• Coercion refers to the practice of forcing someone to act in an
involuntary manner by use of threats or force. According to
Section 15 of the Pakistani Contract Act, 1872, coercion is
defined as committing or threatening to commit any act
forbidden by the Pakistan Penal Code, or unlawfully detaining
or threatening to detain any property to the prejudice of any
person, with the intention of causing any person to enter into
an agreement. For example, if A threatens to harm B's family
unless B signs a contract, B’s consent is obtained through
coercion, and the contract is voidable at B's discretion.

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Free Consent
2) Undue Influence
• Undue influence involves one party taking advantage of their
power over another party to obtain consent to a contract. As
per Section 16 of the Pakistani Contract Act, a contract is
induced by undue influence where the relations subsisting
between the parties are such that one party is in a position to
dominate the will of the other and uses that position to obtain
an unfair advantage. This typically occurs in relationships
where one party holds real or apparent authority over the
other, such as a guardian and ward, doctor and patient, or
solicitor and client. For instance, if a doctor uses his influence
over a patient to get the patient to sign a contract that
benefits the doctor unfairly, it constitutes undue influence.
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Free Consent
3) Fraud
Fraud involves intentional deception to secure unfair or unlawful
gain. Under Section 17 of the Pakistani Contract Act, fraud
includes acts committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive another party
or to induce him to enter into the contract. This can involve
suggesting a fact that is not true, active concealment of a fact,
making a promise without any intention of performing it, or any
other act fitted to deceive. For example, if A sells a car to B
claiming it has never been in an accident when it has, A has
committed fraud.

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Free Consent
4) Misrepresentation
• Misrepresentation occurs when one party makes a false
statement of fact that induces the other party to enter into
the contract. As defined in Section 18 of the Pakistani Contract
Act, misrepresentation includes positive assertions that are
not true, though the person making them believes them to be
true, any breach of duty that misleads another, or causing,
however innocently, a party to make a mistake as to the
substance of the thing. For instance, if A sells a painting to B,
claiming it is an original when it is actually a copy, B's consent
is obtained by misrepresentation.

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Free Consent
5) Mistake
• Mistake refers to an erroneous belief about something. In
contract law, a mistake can make a contract void. As per
Sections 20, 21, and 22 of the Pakistani Contract Act, mistakes
can be of fact or law. A mutual mistake of fact, where both
parties are mistaken about a fundamental fact, renders the
contract void. For example, if A agrees to sell to B a cargo of
goods supposed to be on its way to Karachi, but unknown to
both parties, the ship has sunk, the contract is void due to
mutual mistake. However, a unilateral mistake, where only one
party is mistaken, does not affect the validity of the contract
unless the mistake is known to the other party.

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Lawful Consideration and Object
1) Lawful Consideration
Consideration is a fundamental element of a valid contract. It
refers to something of value that is exchanged between the
parties involved in the contract. According to Section 2(d) of the
Pakistani Contract Act, 1872, consideration can be in the form of
an act, forbearance, or a return promise, given by one party in
exchange for the promise of the other. For a consideration to be
lawful, it must meet the following criteria:
1. It should not be forbidden by law: The consideration must
comply with the law. For instance, if the consideration
involves illegal activities like drug trafficking, it is not lawful.
2. It should not be of such a nature that, if permitted, it
would defeat the provisions of any law: The consideration 15
must not undermine the purpose of any existing law.
Lawful Consideration and Object
3. It should not be fraudulent: The consideration must be genuine
and not involve any deceit or fraud.
4. It should not involve or imply injury to the person or property
of another: The consideration should not cause harm or damage to
any person or property.
5. It should not be immoral or opposed to public policy: The
consideration must adhere to moral standards and public policies.
Examples:
• If A agrees to sell his car to B for 10,000 rupees, B's payment of
10,000 rupees is the consideration for A's promise to sell the car,
and A's promise to sell the car is the consideration for B's
payment. This is a lawful consideration.
• If A promises to pay B 1,000 rupees to commit a crime, this is not
a lawful consideration as it involves an illegal act. 16
Lawful Consideration and Object
2) Lawful Object
• The object of a contract refers to the purpose or intention
behind the agreement. For a contract to be valid, its object
must be lawful.
Examples:
• A agrees to sell his house to B for 10,000 rupees. The object of
the contract (sale of the house) and the consideration (10,000
rupees) are both lawful.
• A promises to pay B 1,000 rupees if B helps him commit a
fraud. This contract is void because the object is fraudulent.
• A agrees to let her daughter to B for concubinage. This
contract is void because it is immoral and opposed to public
policy. 17
Not to be Void Agreement
1. Agreement void if Consideration or Object Is unlawful (Section 23):
Section 23 of the Pakistani Contract Act declares any agreement void if its
consideration or object is unlawful. For example, a contract to sell stolen
goods or to engage in illegal activities like drug trafficking would be
unenforceable under this provision because they violate the law.
2. Agreements Void if Considerations or Objects Unlawful in Part (Section
24): Section 24 stipulates that if any part of the consideration or object of
an agreement is unlawful, the entire contract becomes void. For instance,
a contract to supply goods where part of the payment is intended for
illegal services would render the entire agreement void because it involves
unlawful elements.
3. Agreement Without Consideration Void (Section 25): According to
Section 25, agreements made without consideration are void unless they
fall under specific exceptions like deeds of gift or promises based on
natural love and affection between family members. For instance, a
promise made without any exchange of value, unless it meets these
exceptions, would not be legally enforceable. 18
Not to be Void Agreement
1. Agreement in Restraint of Trade Void (Section 27): Section 27 voids agreements that
restrain individuals from engaging in lawful professions, trades, or businesses, except
under reasonable circumstances such as agreements made when selling the goodwill
of a business. For example, a contract preventing a software developer from working
for a competitor could be void unless it includes reasonable restrictions.
2. Agreements in Restraint of Legal Proceedings Void (Section 28): Section 28 declares
void any agreement that restricts a party from enforcing their legal rights through
usual legal proceedings. This ensures individuals maintain their right to access justice
without undue restrictions, such as clauses limiting the time or manner of legal action.
3. Agreements Void for Uncertainty (Section 29): Section 29 voids agreements where
the terms are vague or incapable of being made certain. For example, contracts that
specify delivery of "a reasonable quantity" without defining what that quantity entails
would be void due to uncertainty, as it lacks clear terms for enforcement.
4. Agreements by Way of Wager Void (Section 30): Section 30 voids agreements made
by way of wager or betting on uncertain events. This includes bets on games of chance
or speculative outcomes, aiming to discourage gambling activities and ensure
contracts are based on valid transactions rather than chance-based winnings.

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conclusion
In summary, contracts are vital legal instruments that establish
enforceable agreements between parties, providing a
framework for conducting transactions and managing
relationships in various domains. Through elements such as
offer, acceptance, consideration, capacity to contract, and free
consent, the Contract Act, 1872, defines the parameters of valid
contracts.

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