The law relating to contract is regulated by the Indian Contract Act, 1872. This act deals with basic and general principles and rules governing contracts. Section 2(h) defines the contract as “an agreement enforceable by law”. Section 10 of the Indian Contract Act, 1872 provides essential elements of a valid contract
Essential elements of a valid contract –
The essential elements of a valid contract are-
1. An Offer or Proposal and Acceptance – One of the basic element of valid contract is agreement between two parties by the means of offer and acceptance. Thus, when offeror makes a definite proposal to the offeree and then accepted by offeree and there is meeting of minds of the parties and an agreement comes into being.
2. Intention to create legal relations – The second essential element of valid contract is that there must be an intention among the parties that the agreement should attached by legal consequences and create legal obligations between the parties. If no such intention is present on the part of parties, there is no contract between the parties. Agreements of social or domestic nature do not form any legal relations between the parties so they cannot term as contracts.
3. Lawful Consideration – It in one of the most essential element of valid contract. Sec 2(d) of Indian Contract Act defines the term consideration.
Sir Fredrick Pollock has defined consideration “as an act or forbearance of one party, or the promise thereof is the price for which the promise of the other is bought”.
For example, if X promises to make a gift of Rs. 100 to Z, and subsequently changes his mind, Z cannot succeed against X for breach of promise, as Z has not given anything in return. It is only when a promise is made for something in return from the promise , that such promise can be enforced by law against the promisor. This something in return is consideration for the promise.
4. Capability of contracting parties – All Natural persons has full capacity to make binding contracts. But Indian Contract Act, 1872 laid down some exceptions –
b) Lunatics and,
c) Persons disqualified by law.
These persons are not competent to contract. Section 11 of the act provides competency of parties. This section provides that the person who has attained majority, who is of sound mind and is not disqualified by law is competent to enter into any contract. A valid agreement requires that contracting parties should understand the legal implications of their conduct.
5. Free Consent – For every contract there must be free consent of the contracting parties. Consent is not free when it is caused by coercion, undue influence, misrepresentation, fraud or mistake. If there is no free consent the contract generally become voidable at the option of party whose consent is not free. For example – If A at the point of pistol asks B to execute a will in his favor and B to save his life does so he can vitiate this agreement as his consent was not free.
6. The Object and Consideration of the contract is legal and is not opposed to public policy- Section 23 provides that consideration or object of an agreement is lawful unless it is
a) Forbidden by law,
b) It is of such nature that if permitted it would defeat the provisions of law,
c) is fraudulent,
d) Involves injury to person or property,
e) Immoral or opposed to public policy.
Every agreement of which the object or consideration in unlawful is void.
7. The terms of Contract are certain.
8. The agreement is capable of being performed.
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