What Are The Legal Rules As To a Valid Contract?

A valid contract is an agreement which is binding, certain and enforceable by law. A valid contract has several essentials like offer, acceptance, lawful object, lawful consideration etc.

The legal rules regarding valid contracts are as follows:-

1. Offer and Acceptance – There must be valid offer followed by its valid acceptance. For an agreement there must be a lawful offer by one party followed by lawful acceptance of that offer by another party. The term lawful refers that both the offer and acceptance must satisfy the specific requirements.

2. Intention to create legal relationship – The parties to an agreement must have intention to create legal relationship. Agreements of a social or domestic nature do not create legal relations and as such cannot give rise to a contract like A promises his friend B to go along with him to an exhibition but later refuses. Here there was no intention to create legal obligation so this is not a valid contract. In case of commercial agreements it is presumed that parties intend to create legal relations.

3. Lawful Consent – It is another essential for a valid contract. Consent means that the parties must have agreed upon the same thing in the same sense i.e. meeting of minds of the parties. For a valid contract it is necessary that the consent acquired must be free. For e.g. if A compels B to enter into a contract at gunpoint then it is not a valid contract as the consent of B is not free.

4. Lawful Object – It is also necessary that agreement should have a lawful object. The object for which the agreement has been entered into must not be fraudulent, illegal, immoral, or opposed to public policy. Every agreement of which the object or consideration is unlawful is illegal and the therefore void. For e.g. Ram promise to give Ghanshyam a diamond ring if Ghanshyam kills Shyam. This agreement is illegal as its object is unlawful.

5. Certainty – According to Section 29 of Indian Contract Act, “Agreements the meaning of which are not certain or capable of being made certain are void.” i.e. a contract must have specific and certain provisions. For e.g. A enters into a contract with B to buy oil for Rs. 200. Here the type of oil or its quantity is not mentioned i.e. it is uncertain so contract is not valid.

6. Lawful Consideration – Consideration is “something in return.” It is some benefit to the party. An agreement is enforceable only when both the parties get something and give something. The something given or obtained is the price of the promise and is called consideration. Consideration for one party may be paid by someone else. For e.g. if A makes a contract with B to buy stolen goods for Rs. 5000 then such an agreement will be void as stolen goods is not a lawful consideration.

7. Parties must be competent to contract – An agreement is enforceable only if its parties possess contractual capacity i.e. they are neither minor, nor of unsound mind etc. It means that the parties to an agreement must be competent to contract. According to Section 11, 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. For e.g. if A makes a contract with B who is a minor to buy coconut Rs. 5000 then such an agreement will be void.

8. Legal Formalities – According to Contract Act, a contract may be oral or in writing. But in certain cases it is necessary to complete certain formalities in certain contacts such as some contracts require registration, written document etc.

Agreement must not be expressly void by law – An agreement must not be one of those, which have been expressly declared to be void by statute. The Indian Contract Act forbids the contracts Section 24-30 which include contract in restraint of marriage, trade, legal proceeding, uncertain agreements and wagers which have been expressly declared to be void. For e.g. if A makes a contract with B to not marriage C for Rs. 5000 then such a agreement will be void as it is prohibited by Sec 26.

Read – Provisions Relating To Minor Under Indian Contract Act, 1872

Jishnu Adhikari

Central University of South Bihar

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