This article is written by Manvendra Shekhawat. Here he has discussed on essential features of a contract.
Every day, people enter into agreements; too often these individuals enter into agreements without bearing in mind the essential provisions which are necessary to create an enforceable contract. A contract is formed or intended to form an agreement between two or more parties. There exist mainly two types of contract or we can say that contracts can be formed in two ways i.e. oral and written. A contract can be formed between two parties by the words only or orally and such type of contracts is known as the oral type of contracts. These types of contracts are hard to enforce as there is no proof of the agreement between the parties before the law and parties can change their statement frequently to save themselves from the penalties by the court. On the other hand, the signed or written contracts are mostly used by the people these days as these type of contracts are more secured as the contract already have the essential provisions of the contracts and what can be the consequences if any of the party does not complete its part. It is easy to enforce written contracts in courts as there is a strong proof of an agreement between them, easy to proof by the parties and reduces the risk which exists in the oral contracts.
A law called the “Statute of Frauds” necessitates those specific kinds of agreements be recorded as a hard copy to keep a person from offering evidence of a non-existent understanding through extortion or prevarication. All in all, the Statute of Frauds says that an agreement for the deal or exchange of land, or an agreement that, by its terms, can’t be performed inside one year of its execution, are just enforceable in the event that it is recorded as a hard copy and marked by the gatherings. Land contracts must distinguish the purchaser and vendor, recognize and depict the property being sold, and express the deal cost and terms of the understanding.
Despite the necessities of the Statute of Frauds, an understanding might be maintained in court if the gathering being sued concedes after swearing to tell the truth to the presence of an agreement. On the off chance that the vendor has acknowledged instalment or the purchaser has acknowledged conveyance of the merchandise or property secured by the oral contract, it might likewise be ruled substantial.
A contract has been defined as “an agreement enforceable by law.” For an agreement to be enforceable by law, it must contain the essential elements which are important for a valid contract.
Section 10 in The Indian Contract Act, 1872 tells about what agreements can constitute to a contract. “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. Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.”
For a contract to be valid both the parties should have given their consent and that consent must be free. Both parties should behave in such a way that they can make an impression for the other party that other party is ready to make a contract and a legal relation, not a social relation. Thus a person who is casually saying that he/she is accepting an offer usually cannot be considered as a contract. On the other hand, a person who has no intention of making and completing a contract but acts that it makes people believe that he/she really wants to enter into a contract can be termed as a contract. Legally, it is the external appearance which is important in determining whether one is considered to a contract or not. Agreements which are of religious, social nature and moral e.g. a friend’s promise to other to go on a walk or picnic with him does not amount to a contract as both the parties didn’t intende on forming a legal relation and were neither intended to face legal consequences.
A contract comes into existence only when all the terms and conditions are satisfied and fulfilled by the parties to the contract. If any of the condition is not fulfilled by any of the party that agreement will be void. We can also say that contracts are self-regulated and no one else other than yourself is forcing you to enter into a contract. It’s upon your discretion that you want to enter into a contract or not and no one in any condition can force you to enter into any contract and if does so that agreement will be void. Later, the duties after entering into an agreement are defined by the state and if not followed be punished but entering into a contract is not forced by anyone else other than yourself. According to the Section 10 of the Indian Contract Act, 1872 there are mainly four conditions which have to be satisfied to form a valid contract, i.e. free consent of parties to the contracts, competent to contract, for a lawful consideration and with a lawful object.
A contract formed between two or more parties will be valid only when the consent given by the parties is free. A contract is based on the principle of consensus-ad-idem which says that all the parties who are entering into a contract should agree upon all the things related to the agreement in the same offence. The contracting parties should also possess the same understanding related to all the subject material of the contract. The consent given by the parties should be free and be given voluntarily and a mere consent by the parties does not form a contract or we can say that not enough to be a contract in the eyes of law. “The definition of free consent under the Indian Contracts Act is Consent that is free from Coercion, Undue Influence, Fraud, Misrepresentation or Mistake. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.” If at any point the assent given by the parties is influenced by any of the component stated above in the definition, it always creates a doubt if the consent was free or not.
Competence to contract
While the formation of a contract, contractual capacity is often spoken of as either capacity or competency. When it comes to forming a valid contract certain people or section of people are there who are not competent enough to form a contract. In short, both the parties to an agreement must have the capacity to contract to make an agreement legally enforceable by law. Contractual competency implies that both the parties are able to realize that a contract has been formed and the parties should also understand the basic needs and the consequences of the agreement in which they have given their assent. In short, we can say that when parties don’t apprehend the basis of the agreement they have entered, the law defines this type of agreement to be void because of the lacking of the party or both the parties to form a contract which is legally binding. It is also important that the contractual competence has no relation to a person’s individual ability to negotiate the nature of the contract. So, just for a reason that a person is not able to understand every provision of the contract does imply that he/she is not competent to form a legally binding contract. “The Indian Contract Act of 1872 defines who is of the age of majority, who is of sound mind and who is not disqualified from contracting by law.”
Legality of object and consideration
Another essential feature of a valid contract is that the object and the consideration must be lawful and not against the provisions by law. The object and the consideration of the object need to be lawful otherwise the contract will be declared void. In some cases, the object for which the parties entered into an agreement is lawful but the consideration for the same is defeating the provisions of a lawful consideration and which will lead the agreement to be termed as void and vice versa. So, for an agreement to be a valid one both the object and consideration should be lawful. The court will not enforce any agreement if its object and consideration are not lawful. The term “object of an agreement” is used to define the purpose of design. Section 23 of the Indian Contract Act, 1872 clearly states about what object and consideration are lawful and what are not. These are:-
- If that object or consideration is forbidden by law specifically
- Are of that nature which will defeat the very basic purpose of the law
- If the object or consideration is fraudulent
- If that involves or result in injury to any living person or the property of the person
- If the court has regarded any special objects and considerations as immoral
- Those object and considerations which are against the policy of the public and can cause harm to the public.
As our project work is mainly going in and around with consideration part, so from here onwards, we will mainly rely on the consideration and focusing on the part which includes the contracts without any type of consideration, i.e. NUDUM PACTUM. These types of contracts are included in the exceptions of consideration where there is no requirement of consideration to form a valid contract which is enforceable by law.