Essentials of a Valid Contract

Under Indian Contract Act, 1872

Contents

Essentials of a Valid Contract Summary Mind Map (Text Format)Illustrative Situations FAQs Relevant Case Laws & Citations

A contract is a legally enforceable agreement between two or more parties. Under Section 2(h) of the Indian Contract Act, 1872, a contract is defined as “an agreement enforceable by law.” However, not all agreements are contracts. For an agreement to become a valid contract, it must fulfill certain essential elements as provided under the Act.

Essentials of a Valid Contract

1. Offer and Acceptance (Consensus ad idem)
There must be a lawful offer by one party and lawful acceptance of the offer by the other party. The acceptance must be absolute and unconditional.

Case Law: Carlill v. Carbolic Smoke Ball Co. (1893) – A landmark English case illustrating valid offer and acceptance.

2. Intention to Create Legal Relations
Both parties must intend to enter into a legally binding relationship. Social or domestic agreements do not qualify as contracts.

Case Law: Balfour v. Balfour (1919) – An agreement between husband and wife was held not legally enforceable.

3. Lawful Consideration
As per Section 2(d), consideration refers to “something in return.” The promise must be supported by a lawful consideration.

Case Law: Currie v. Misa (1875) – Defined consideration as a benefit to one party or a detriment to the other.

4. Capacity to Contract
As per Section 11, the parties must be competent:

Must be of the age of majority.
Must be of sound mind.
Must not be disqualified by law.
Case Law: Mohori Bibee v. Dharmodas Ghose (1903) – A minor’s agreement was held void ab initio.

5. Free Consent
Consent must be free and not caused by:

Coercion (Section 15)
Undue influence (Section 16)
Fraud (Section 17)
Misrepresentation (Section 18)
Mistake (Section 20–22)

If consent is obtained unfairly, the contract is either void or voidable.

6. Lawful Object
The object of the contract must be legal. Contracts with unlawful objects are void.

Section 23 explains that the object must not be:
- Forbidden by law
- Defeating the provisions of any law
- Fraudulent
- Injurious to person or property
- Immoral or opposed to public policy

7. Certainty and Possibility of Performance
The terms must be clear and not vague or ambiguous. Also, the performance must be possible under the law.

Section 29: Agreements, the meaning of which is uncertain, are void.
Section 56: Agreements to do impossible acts are void.

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8. Not Declared Void
The agreement should not be one that the law declares void such as:

Agreements in restraint of marriage (Section 26)
Agreements in restraint of trade (Section 27)
Wagering agreements (Section 30)

9. Legal Formalities
Although most contracts can be oral or written, certain contracts must be in writing and registered (e.g., sale of immovable property).

Summary Mind Map (Text Format)

Essentials of a Valid Contract:
→ Offer & Acceptance
→ Intention to Create Legal Relations
→ Lawful Consideration
→ Capacity to Contract
→ Free Consent
→ Lawful Object
→ Certainty & Possibility of Performance
→ Not Declared Void
→ Legal Formalities (if applicable)

Illustrative Situations

Q1. A 16-year-old boy enters into an agreement to purchase a bike. Is this a valid contract?
A: No, since the boy is a minor and not competent to contract, the contract is void.

Q2. A agrees to pay B ₹10,000 if B smuggles goods for him. Is this enforceable?
A: No, as the object of the contract is unlawful and hence void.

Q3. A and B agree to sell a horse that neither of them owns or can obtain. Valid?
A: No, the performance is impossible and therefore the contract is void.

FAQs

Q1. Is a verbal agreement enforceable in India?
Yes, if it fulfills all essentials of a valid contract, except where law requires a written agreement.

Q2. What happens if a contract lacks consideration?
The contract is generally void unless it falls under exceptions under Section 25 of the Act.

Q3. Is a minor’s contract valid if it benefits the minor?
A minor cannot be bound by a contract, but can accept benefits if there is no obligation on the minor.