Tag: Contract Act

Essentials of a Valid Contract under the Indian Contract Act

Law

May 28, 2021
/ Leave a Comment on Essentials of a Valid Contract under the Indian Contract Act

5 min
3 years
820 words

Tagged Contract Act, Essentials, Indian Contract Act, Valid Contract

Essentials of a Valid Contract under the Indian Contract Act

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.

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.

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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Contractual Liability of Minor under Indian Contract Act, 1872

Law

May 25, 2021
/ Leave a Comment on Contractual Liability of Minor under Indian Contract Act, 1872

2 min
3 years
396 words

Tagged Contract Act, Minor Agreement

Contractual Liability of Minor under Indian Contract Act, 1872

A common legal complexity often arises when an agreement with minor parties takes place. This is problematic because the Act does not permit such agreements outright.

Agreement with Minor

The Indian Contract Act, 1872 is an important legislation in the field of commercial law in India. It is basically responsible for regulating contractual relationships and obligations in India and is the key act regulating the contracts in India. It is applicable to all states in India. A common legal complexity often arises when an agreement with minor parties takes place. This is problematic because the Act does not permit such agreements outright.

Contractual Capacity

Section 11 of the Contract Act, 1872 explains the requirements of competency for entering into contracts. Individuals or entities can create contracts only if they meet these requirements. The very first such requirement is that of majority age.

The general rule of contracts is that every person, whether natural or artificial, can enter into contractual obligations.

Section 11, however, lays down certain exceptions. For example, minors, persons of unsound mind and those whom the law specifically disqualifies are the exceptions

The rationale behind Section 11 is that all parties to a contract must be competent to understand their obligations. Since a mature mind is important for this purpose, the law prohibits agreement with minor parties.

This is because minors would find it difficult to comprehend and fulfil their obligations. Hence, the law itself prohibits them from creating contracts.

Agreement with Minor parties

Section 11 states that only persons who have attained majority according to the law are competent to contract. Therefore, there must be a law that defines the age of majority.

In India, the Indian Majority Act, 1875 declares the age of majority of all persons to be 18 years. If a minor has a guardian or Court of Ward looking after him, his age of majority becomes 21 years. Hence, any contract with a party below the age of 18 years is invalid as per the Act.

A very important case that had explained this issue is Mohiri Bibi v. Dharmodas Ghose. In this case, a minor had borrowed some money from a money-lender by mortgaging his house.

The money-lender moved to take Possession of the minor’s house when he defaulted payment. The court, however, said since an agreement with minor parties is void, the money-lender could not enforce this contract.

Indian courts have repeatedly used this judgement to abrogate minors from contractual obligations. Hence, minors cannot enter into agreements unless some legal provisions allow them.

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