A contract is the basis of a society that is civilized. The legislation on
contracts in India is included in the 1872 Indian Contract Act. Plainly defined,
a contract implies that if two parties have signed an agreement containing such
obligations (promises) to be met by both parties, and if that formal agreement
becomes binding by law, it becomes a contract. Enforceable by law implies when
only people that are a party to the agreement have attained the power to enforce
and a violation of such rights will warrant legal action, along with the
repudiation of the whole contract.
In any individual's day-to-day life, contracts play a crucial role. The Indian
Contract Act regulates agreements or contracts involving diverse parties.
Therefore, understanding the fundamental elements of a legal contract is very
necessary because only if those elements are met is the contract claimed to be
valid. In section 2(h).
The Indian Contract Act, 1872 describes the term contract as an
agreement enforceable by law is a contract. Section 2(e) of the Act defines the
agreement, defining the consideration for each other, like any promise. When the
individual to whom such a proposal is made gives his approval, the proposal is
said to be agreed, then the proposal is said to be accepted and becomes a
An agreement is an agreed promise, and a contract is a law-enforceable
agreement. In contract law, there is a promisor (a person who agrees to do
something in exchange for consideration) and a promisee (a person who pay such
consideration). Section 10 of the Act specifies that if the parties, with legal
respect and legitimate object, have given their consent free of force or
unreasonable interference, then all agreements are considered to be contractual
and such contracts will not be declared void. All contracts are known to be
agreements, although not all agreements are contracts.
For reference, A and B agree that A proposed to buy a house from B for Rs
50,00,000, and B accepts the proposal. The agreement is indeed a contract as it
is enforceable by law because a proposal has been approved by a party and has
been a valid consideration.
Essentials Of A Valid Contract
There are some components that would constitute a legal contract when completed
and, prior to that, based on the situation, it would be called voidable.
Section-10 of the Act lists such requirements that must be followed in order to
constitute a legal contract.
There are seven components that constitute a valid contract, these are as
Under the Indian Contract Act, 1872, as is set out below, those contracts are
Offer and Acceptance The essence of a contract is Offer and Acceptance. Unless there is an offer
and such an offer must be approved, there will be no contract. An
offer/proposal is, in compliance with section2(a) of the Contract Act:
If one person shows to another his desire to do or abstain from doing
something in order to obtain the other's consent to such an act or
abstinence, he is said to make a proposal.
The offer must be made by one side, and the other party must agree to such
an offer and accept it and Acceptance means that, according to Section 2(b)
of the Contract Act, the person to whom the offer was made has given his
consent to that offer. Acceptance of the proposal results in
agreement-forming promises. In a specific or implicit way, acceptance must
Such an offer must express the desire to do or abstain from doing so in
order to gain the approval of others. The offer may be articulated or
implied, but there must be the intention to form a contract and such an
offer must be conveyed. Though the agreement is necessary, "Consensus
ad-idem" must exist. Consensus ad-idem implies a meeting of minds.
For example, in order to buy mango, A contracted with B. Now, A wanted a
certain sort of mango, but B figured it was a regular mango. While there is
a valid acceptance in this situation, there is a lack of meeting of minds
between the parties; meeting of minds on the form or condition of mangoes.
Intention to create a legal obligationIn the Indian Contract Act 1872, there is no explicit clause that makes it
necessary to establish legal obligation, but over the years, different
rulings have resolved the position making the intention to create legal
obligation an important requirement. The purpose of forming legal
obligations consists of a party's willingness to recognize the legal
implications of entering into an arrangement. In the formation of a
contract, it is important that all sides agree to the same thing in the same
Therefore, if two people enter into an obvious contract with respect
to a certain individual or ship, and it turned out that one of them,
deceived by the resemblance in the name had in mind another person or ship,
there will be no contract between them.
Consideration An agreement not endorsed by consideration is invalid, as per section 25 of
the Act. Such concern needs to be real and not delusional. A
contract without consideration will become Nudum Pactum. There must be no
need for the adequacy of this consideration.
However, Section 25 lays out a
few exceptions where an unconsidered exception is not invalid and the
instances of such exceptions include an agreement reached between parties on
behalf of affection and love, an agreement where it is a commitment to pay,
a person who has already done something willingly for the promisor, etc.
Some essentials for a valid consideration:
- It must be at the behest of the Promisor, which means that it must come from
the Promisor on its own accord and not from a third party. Subsequently, the
fulfillment of a civil obligation is thus not a consideration.
The consideration could be:Past consideration whether the promisor has received consideration from another
party previous to the date of execution of the contract. Just example paying
Present Consideration, whether immediate consideration is given as the contract
is made or executed. It is thus often referred to as "executed consideration."
Future Compensation, if the consideration is paid after the deal has been made.
Constructed construction is granted after the execution of the contract in
regard to 'construction contracts'.
- Consideration is not invalid merely because it is incomplete, except
that it is at the will of the Promisor.
In India, consideration for a contract may flow from the promise or from any
third individual who isn't really a party to the agreement, as far as it is at
the wish of the promisor, this is called privity of consideration.
For example, if 'A' promised 'B' to pay Rs. 99 to 'C', a third party. Thus, in
the event of a breach of contract, 'A' and 'B' will sue each other.
Competent To ContractAny person who is of a sound mind who has reached the age of 18 years and is not
excluded by any statute is said to be competent to shape a contract. A minor's
contract is invalid ab initio and no liability results from it. A minor can
plead in a suit as a defense of his minority, so the promissory estoppel law is
An individual is said to be of sound mind according to Section 12 of
the Act if he is able to comprehend the terms of the contract and its
implications at the time of making the contract and can form a reasonable
judgment about it.
A person does not have to be a lunatic to be labeled unsound
mind for the intent of the contract law, plain incapacity to understand the
contract terms. When we state that the party must not be excluded by statute, it
suggests that, as in the case of an insolvent person, such legislation forbids
him from entering into a contract.
A contract, agreed into with or by a minor is void-ab-initio, i.e. no
liability shall occur after its creation. Since meeting the age of majority, a
contract cannot subsequently be ratified during a party's minority age, so each
contract requires independent consideration. If, however, a contract is made for
a minor's benefit, then it is a legal contract. In addition, a minor may plead
his minority in a suit as a defense, so the law of promissory estoppel is not
- Doctrine of Estoppel:
Estoppel is a rule of law that forbids a person from
taking a different position from what he had before a deal was concluded. Thus,
when a party A makes a pledge to B that he will buy potatoes grown on his farm,
Promissory estoppel means that B will buy potatoes grown on his farm and B grows
potatoes accordingly on the assumption that A will buy them. Today, promissory
estoppel forbids A from denying that no such thing was promised, or in other
words, it prevents him from returning to his pledge and not buying the potatoes.
- Unsound Mind:
A man is said to be of sound mind pursuant to section 12 if he
is able to comprehend it at the time the contract was made and is able to form a
reasonable judgment on the impact of it on his interests.
Free ConsentFor a legal contract, simple consent is not sufficient; consent must be free.
Sec. 13 describes consent as:
If they agree to the same issue, in the same way,
two more parties are said to consent.
This is also known as the Ad idem
Consensus. In the event of the lack of free consent, the deal is invalid. Free
consent is, as per Section 14 of the Indian Contract Act, consent that is not
gained through coercion, undue influence, fraud, misrepresentation, and mistake.
- Coercion: Section 15:
of the Indian Contract Act of 1872 allows for any
activity that is unauthorized or unconstitutional in respect of property or that
is forbidden by statute by Indian Penal Code. For starters, a husband pressures
his wife to throw acid on her if she doesn't sign the documents. This means
coercion because under coercion the contract is a contract that is null.
- Undue influence:
The Indian Contract Act of 1872, section 16, describes a
party that exploits its dominant power over the Party by controlling the party.
The provisions of Article 17 of the Indian contract law of 1872 are
specified where, in the absence of an unwillingness and benefit, the conditions
offered by one party before the other Party causes harm. If the false
declaration is made, if any false promises made without the intent to do so are
withheld then if the other party behaves of deception are made, the act would be
a crime in order to do so.
Section 18 of the Indian Contract Act, 1872 describes it
to represent the truth inaccurate without the knowledge of the other party or to
mislead him. The faction is innocent of misrepresentation, and it did so without
being aware of it.
Mistake of Fact or is specified under Sections 20 and 21 of the
Indian Contract Act, 1872 If either or both parties make some mistake (fact or
law) leading to an invalid contract. For instance, if X tries to enter into a
contract with A to sell the car but erroneously enters into a contract with D
assuming that he is A and sells the car to him. It has, thus, been an invalid
The object of the contract must be lawfulIn Sec. 23 of the Act, unlawful consideration is specified. The improper object
or intention is one that is either prohibited by law or has the power to defeat
the rule of law or includes harm to the body or property of an individual or the
court finds the object of the contract as being dishonest against public policy
or the intent of the contract. The object of the contract must be legitimate for
a legal contract and must not slip under any of these.
It must not be clearly declared as voidThere are few contracts explicitly deemed void by the Indian Contract Act 1872.
Contract in marriage restriction, contract in trade restraint, etc. are a few
examples of such contracts. It must not be explicitly declared invalid by the
Indian Contract Act 1872 or any other statute in effect in order for a contract
to be valid.
- Restraint agreement for marriage (Section 26).
- Agreement on Trade Restraint (Section 27).
- Agreement to restrict legal proceedings (Section 28).
- Agreement of unspecified meaning (Section 29).
- Agreement on Wagering (Section 30).
There are the most relevant and foundational conditions for the existence of
contracts that must be met in order to render a contract a legal contract. In
conclusion, it may be assumed that a contract is an arrangement that is
technically enforceable. When it fulfills those requirements, an agreement
becomes enforceable. The 'essentials of a legal contract' can be considered
these conditions. In the eyes of the statute, where any of the essentials are
absent, the contract is null, voidable, unconstitutional, or unenforceable.
Written By: Shruti Sharma
- https://lawctopus.com/clatalogue/brief-introduction-to-essentials-of-contracts/ (visited
on 10 May)
- http://www.legalserviceindia.com/legal/article-3349-essentials-of-valid-contract.html (visited
on 10 May)
- NLU Nagpur