Essentials of a Valid Contract under the Indian Contract Act
AUTHOR : Shivanshu Agarwal
Essentials of a Valid Contract under the Indian Contract Act
In today’s times we can see that people enter into a contract very often without keeping in their mind the essential provisions which are necessary to create an enforceable contract. A contract is an agreement between two or more persons to do something and it can be written or spoken by using formal and informal terms.
A valid contract is a contract which is enforceable by law and if it is not valid then it may cause a disturbance in the day-to-day working of the business. Laws relating to the contract are mentioned in the Indian Contract Act, 1872.
Some essentials of a valid contract under the Indian Contract Act are :
1. Offer and Acceptance
In the essentials of a valid contract act, there must be two or more parties making a contract. The terms of the contract must be definite. One must offer and the other must accept that offer, and acceptance of that offer signifies agreement on that contract.
For Example – A offers to sell his bike to B for 50000, B accepts that offer and then this acceptance signifies the agreement between A and B.
2. Free consent
One of the most important things in the contract is free consent which means the parties are said to be in consent when they agree upon the same thing, in the same sense and at the same time. Consent must be free from fraud, misrepresentation, mistake of fact etc.
3. Intention to create Legal Relationship
There must be a legal relationship, from the sides of both parties and they must legally bind themselves as a result of such an agreement. Agreement of welfare and social causes do not come under contract.
4. Capacity of the parties
Another important aspect of the contract is the contractual capacity it shows the capability of parties to enter into a valid contract. It is also made sure that each person entering in a contract is an adult. He/she must be of sound mind and also not disqualified from contracting by any law.
5. Lawful Consideration
A valid contract must be supported by consideration, which means there should be some transaction involved between the parties either in cash or kind. It can be further classified into three parts –
- Past Consideration – It occurs when the promisor has accepted consideration before the performance date of the contract by any party.
- Present Consideration – When consideration is given in the present time or when the agreement is being signed.
- Future Consideration – It occurs when the consideration is given after the contract is made.
6. The doctrine of Promissory Estoppel
It is a doctrine which prevents the parties from backing out from their contract. It also says that if the damage is caused by the backout of any party then that party will have to pay the compensation for the damages.
7. Certainty
It means that the terms and conditions of a contract must be certain and not illusory or vague.
For Example – If A agrees to pay the money after some time then he/she must tell the exact date when the money will be paid.
8. Writing and Registration
A contract may be anything in oral and writing but for a valid legal contract it must be in written form and registered.
For Example – If someone is entering into a contract to purchase a land then proper paperwork should be done to make the contract valid.
9. Possibility of performance
An agreement to do an impossible act in itself is void. This means that no agreement can be made for a non-doable task or something which is unreal.
For example – A promises to give Rs. 20000. If B can prove to him that god exists, this type of agreement is in itself void.
10. Void Agreements
An agreement should not contain any element that results in making it void. Some void agreements are – restrain of marriage, restrain in legal proceedings, restraint of trade, having uncertain meaning and wagering contract etc.
11. Legality of object and consideration
In any contract the object of consideration must not be against any provision of law and must be valid, if it is not valid then it will be declared to be void.
For Example – If a country has banned cryptocurrencies, then these currencies cannot be an object of consideration in any contract under the legal framework of that country.
Conclusion
As we can see that contract plays an important role in the day to day life of individuals. It is imperative to have all the elements of a contract for constituting the valid contract. We also have to be very careful while making a contract so that nobody is infringed on his or her legal right and are treated equally. If any term and condition is missing from the contract then the contract is invalid, voidable, illegal or unenforceable in the eyes of law.
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