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Essential Elements of Valid Contact

 Essential Elements of a Valid Contract

The essential elements of a valid contract are as follows:

  1. Offer and Acceptance

 There must be “lawful offer” and a “lawful acceptance” of the offer. Thus, resulting in an agreement. The adjective ‘lawful' implies that the offer and acceptance must satisfy the requirements of the Contract Act in relation thereto.

  1. Intention to create legal relations

There must be an intention among the parties that agreement should be attached by legal consequences and create legal obligations. Agreements of a social or domestic nature do not contemplate legal relations, and as such they do not give rise to a contract. An agreement to dine at a friend's house is not an agreement intended to create legal relations and therefore it is not a contract. Agreement between husband and wife also lack the intention to create legal relations and does do not result in contracts.

  1. Lawful consideration

 The third essential element of a valid contract is the presence of “consideration”. Consideration has been defined as the price paid by one party for the promise of the other and agreement is legally enforceable only when each of the parties to it gives something and gets something. This something given or obtained is the price for the promise and is called consideration. Subject to certain exceptions, gratuitous promises are not enforceable at law.

 The ‘consideration’ may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. It may be past, present or future. But only those considerations are valid which are lawful. The Consideration is lawful unless it is forbidden by law; or is of such a nature that, if permitted it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or is immoral; or is opposed to public policy (Sec. 23).

  1.  Capacity of Parties

 The parties to an agreement must be competent to contract, otherwise it cannot be enforced by a court of law. In order to be competent to contract the parties must be of the age of majority and of sound mind and must not be disqualified from contracting by any law to which they are subject (Sec. 11). If any of the parties to the agreements suffers from minority, idiocy, drunkenness, etc., the agreement is not enforceable at law, except in some special cases, example-  in the case of necessaries supplied to a minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate (Sec. 68).

  1. Free Consent

Free consent of all the parties to an agreement is another essential element of a valid contract. Consent means that the parties must have agreed upon the same thing in the same sense (Sec. 13). There is an absence of ‘free consent' if the agreement is induced by  coercion, undue influence, fraud, misrepresentation or mistake (Sec. 14).

 If the agreement is vitiated by any of the first four factors, the contract would be voidable and cannot be enforced by the party guilty of coercion, undue influence, etc. 

The other parties i.e., the aggrieved party can either reject the contract or accept it, subject to the rules laid down in the Act. If the agreement is induced by neutral mistake which is material to the agreement, it would be void (Sec. 20).

  1. Lawful Object

 For the formation of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object.

 The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property of another (Sec. 23).

If the object is unlawful for one of the other of the reasons mentioned above the agreement is void. Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution he cannot recover the rent through a court of law.

  1. Possibility of Performance

 Yet another essential feature of valid contract is that it must be capable of performance. Section 56 

lays down that “An agreement to do an act is impossible in itself, physically or legally, the agreement cannot be enforced in Law.

Illustration: A, agrees with B, to discover treasure by magic. The agreement is not enforceable.


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