This article is written by Abhay Pandey, student, K.S. Saket P.G. College, Ayodhya.
A Contract is a legally binding agreement that exists between two or more parties to do or abstain from doing something.
According to section 2(h) of the Indian Contract Act,1872, ‘An agreement which is enforceable by law is a Contract’.
Pollock- “Every agreement and promise enforceable by law is a contract”.
Salmond- “A contract is an agreement creating and defining obligation between two or
or more persons by which rights are acquired by one or more to acts or
forbearance on the part of others”.
Anson- “The law of contract is that branch of law which determine the circumstances
in which a promise shall be legally binding on the person making it’.
Now after examining the definitions of contract we can say that-
Contract = Agreement + Enforceability
Illustration- There is an agreement between A and B that A will construct a house for B, and B will pay Rs. 10 lakhs to A.The agreement between A and B is a contract because it is enforceable by law.
Essential elements of a valid Contract
- Offer and Acceptance
- Intention to create a Legal relationship
- Lawful Consideration
- Competent parties
- Free consent
- Lawful Object
- Not expressly declared void
- Offer and Acceptance: There must be a lawful offer and acceptance for the formation of an agreement. The adjective ‘lawful’ implies that the offer and acceptance must satisfy the requirements of the contract act in relation thereto. The offer or proposal is defined under section 2(a) of the Contract Act. section 2(b) of the Act provides that when an offer is accepted then it becomes a promise.
Felthouse v. Bindley– In this case, it was held that “An offer cannot prescribe silence
mode of acceptance”.
Carlil v. Carbolic Smoke Ball Co. – In this case, a medical firm carbolic smoke ball company advertised that any person caught influenza after using the medicine of the company (viz. Carbolic smoke ball), for a specified period, would be 100 pounds. Mrs. C, after using the medicine (as prescribed by the company) nevertheless caught influenza. It was held that she was entitled to recover 100 pounds because the Company’s advertisement was something more than an invitation to transact business.
Lalman Shukla v Gauri Dutt – In this case, it was held that ‘The mere knowledge of an offer does not imply acceptance by the offeree’.
- Intention to create a legal relationship: There must be a clear intention among the parties that the agreement should be attached by legal consequences and create a legal obligation.
Agreements of a social or domestic nature do not contemplate a legal relationship, and as such, they do not give rise to a contract.
Balfour v. Balfour– In this case, it was held that if an agreement is domestic in nature then that agreement is not enforceable by law.
Jones v. Padvattan– In this case, it was held that domestic agreements are presumed not to be legally binding unless there is a clear intention.
- Lawful Consideration- (Quid Pro Quo)– Third essential element of the valid contract is a consideration. The term consideration has been defined under section 2(d) of the act.
In Currie v. Misa, Justice Lush defined consideration “A valuable Consideration in the sense of law may consist either in some Rights, Interest, Profit or Benefit accruing to one party or some forbearance detriment, loss or responsibility given, suffered or undertaken by the other’.
Section 25 of the Act declares that an agreement without the consideration is void.
- Competent parties: Section 11 of the act declares that who are competent to contract. According to this section the contracting parties
Section 11 of the Act states the criteria of parties competent to contract, which is as follows:
- Must attain the age of majority ( an agreement with a minor is void ab initio – Mohri bibi v. Dharmodas Ghose,1903 )
- Person of sound mind-
- The person should not be disqualified by law
- Free consent- Free consent of the parties is another essential of the contract. Section 14 of the Act defined the term free consent as follows-
consent is said to be free when it is not caused by –
- Coercion (S.15)– Committing any act forbidden by The Indian Penal Code 1860 or unlawful detaining of property, or threatening to commit these acts. Chickam Amiraju v. Chickam Sheshamma – Threat to suicide amounts to coercion
- Undue influence (S.16)– The use by one party to the contract of his dominant position for obtaining an unfair advantage over the other party.
- Fraud (S.17)– In Derry v. Peek, It was held that representation made with reckless indifference amount to fraud.
- Misrepresentation (S.18)– It means a false representation.
- Mistake (S. 20, 21 and 22): there are two types of mistakes i.e. mistake fact and mistake of law.
- Lawful object – For the formation of a contract, it is also necessary that the parties to an agreement must agree to a lawful object. The object must not be fraudulent or illegal or immoral or against the public policy or must not imply injury to the person or the other of the reason mentioned above the agreement is void. if A forces B to sign a contract for murdering C. This is not a lawful object. Hence, the contract will be void.
- Not expressly declared void- An agreement must not be one of those, Which have been expressly declared to be void.
For example, agreement without consideration(S.25), agreement in restraint of marriage(S.26), agreement in restraint of trade(S.27), agreements in restraint judicial proceedings(S.28), an agreement by way wager(S.30) etc.
Contracts play a very important role in the day-to-day life of every person. Contracts or agreements between various parties are framed and validate by the Contract Act. So for the formation of a contract, the above-given conditions must be fulfilled by the parties.