This article on ‘Essentials of a Valid Contract under the Indian Contract Act, 1872‘ was written by Ananya Bansode, an intern at Legal Upanishad.
There are a certain few conditions that are required to be fulfilled for a contract to be a valid one. All of these conditions shall be discussed in this article.
The Indian Contract Act of 1872 is the primary statute governing contracts in India. It includes various universal principles that apply to contracts and the fundamental components of a contract. It just specifies numerous procedures pertaining to contracts rather than imposing any explicit obligations on the parties. Through the development of trust and the reduction of risk between parties, contracts serve as the foundation of society.
What is a contract?
A contract is when two or more parties exchange an act or promise in which one party provides something of value in return for something else.
Section 2 (h) of the Indian Contract Act of 1872 defines “contract” as “an arrangement enforceable by law.” In other terms, a contract is everything that establishes an agreement and is supported by national law.
As the act says, “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.”
Essentials of a Valid Contract
According to Section 2(A) of the Indian Contract Act, 1872, “When a person expresses his willingness to another person to do or to abstain from doing something and also obtains the consent of such expression, it is called an offer.” In the development of a contract, an offer is the first stage. The person making the offer is referred to as the “offeror” or “proposer,” while the one receiving it is referred to as the “offeree” or “proposee.” An “offer” and an “invitation to offer” are not the same, they are very different. Under the Contract Act’s definition of the word “offer,” an invitation for others to make bids does not constitute an offer.
According to Section 2(b) of the Contract Act, acceptance happens when the person to whom the offer was made consents to it. The parties are obligated to keep their promises once the offer has been accepted and the offeror has been informed of the acceptance. Similar to an offer, an acceptance might be revoked before the offeror receives the news of it.
- Lawful Consideration
According to section 2(d) of the Indian Contract Act, 1872, the price at which the promise of the other is purchased is known as consideration, and a promise that has been delivered for value in this way is enforceable. Exnudo pacto non aritio actio, or that it cannot be deemed to be binding on the parties, describes an agreement without consideration as being only a mere promise. Consideration is the deliberate refraining from doing something at the request of the promisor.
- Free consent
According to Section 10 of the Contract Act, a contract is legitimate if it was entered into with the parties’ voluntary consent. In accordance with Section 14 of the Indian Contract Act, consent is said to be free if it is not brought about by any of the following:
- A. Misrepresentation (Section 18)
- B. Fraud (Section 17)
- C. Undue Influence (section 16)
- D. Coercion(section 15)
- E. Mistake (Sections 20 to 22)
- Intention to create legal relations
It is described as having the purpose of engaging in a legally binding agreement or contract, which indicates that the parties are aware of and consent to the potential legal repercussions of a contract violation. The aim of establishing a legal relationship must be expressed in a contract. In other words, if one of the parties breaks his agreement, he or she will be held legally liable.
According to Section 10 of the Contract Act, a contract is a contract if, among other requirements, it is concluded with the voluntary assent of parties who are legally able to do so. People who are of legal age to contract (that is, over 18 years of age), of sound mind, and who are not prohibited from doing so by any laws to which they are subject, are competent to do so. To put it another way, it says that a kid, a lunatic, an imbecile, and an intoxicated person cannot engage in a legal contract.
- Lawful object
If a contract pertains to an unlawful objective, it is unlawful. For example, a contract for murder or one to cheat the Inland Revenue Department are both unlawful, and as a result, would be void and unenforceable. According to Section 23 of the Indian Contract Act, a contract’s object is not lawful if it violates legal requirements, cheats the system of justice, is dishonest, immoral, or goes against the interests of the public. It also must not cause injury to people or property.
- Agreement not been declared void
In addition to the limitations of Section 10, the Contract Act explicitly declares several kinds of contracts to be invalid. Such contracts are covered in Sections 26 to 30. There are several contracts that the Contract Act has specifically ruled invalid,
- a. Agreements that are void due to uncertainty (section 29)
- b. Agreements in restraint of proceedings (section 28)
- c. Agreements restricting trade (section 27)
- d. Agreement of wager are void (section 30)
- e. Agreements restricting a marriage (section 26)
A contract must be entered into by two or more parties in order to be legally binding. When parties engage in a contract, they must reveal any information that is pertinent to the transaction and must not knowingly misrepresent the terms and circumstances of the agreement. The Indian Contract Act is very well drafted as it covers all the aspects of a contract and covers almost everything, leaving very little to zero grey areas or loopholes in that law.
By far, these are the most important and fundamental contract requirements that must be followed. However, additional criteria can be required by a particular law or for a particular kind of contract. Additionally, the parties must be competent to enter into the contract, and it must have legal consideration as well as a legal object. The agreement is also said to be voidable at the discretion of a party when consent is not given willingly.
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- Essentials of Valid Contract, available at: https://www.vedantu.com/commerce/essentials-of-valid-contract (last visited on July 19th, 2022)
- Essentials of a Valid Contract, available at: https://www.legalserviceindia.com/legal/article-6411-essentials-of-a-valid-contract.html (last visited on July 19th, 2022)
- ESSENTIAL ELEMENTS OF A VALID CONTRACT, available at: https://www.writinglaw.com/essential-elements-of-valid-contract/ (last visited on July 19th, 2022)