Meaning:” A contract is an agreement made between two (or) more parties which the law will enforce.”
Definition: According to section 2(h) of the Indian contract act, 1872. “An agreement enforceable by law is a contract.
According to SALMOND, a contract is “An agreement creating and defining obligations between the parties”
Essential elements of a valid contract:
According to section 10, “All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and not here by expressly declared to be void”
In order to become a contract an agreement must have the following essential elements, they are follows:-
1) Offer and acceptance:
To constitute a contract there must be an offer and an acceptance of that offer.
· The offer and acceptance should relate to same thing in the same sense.
· There must be two (or) more persons to an agreement because one person cannot enter into an
agreement with himself.
2) Intention to create legal relationship:
· The parties must have intention to create legal relationship among them.
· Generally, the agreements of social, domestic and political nature are not a contract.
· If there is no such intention to create a legal relationship among the parties, there is no
contract between them.
Example: BALFOUR (vs) BALFOUR (1919)
Facts: A husband promised to pay his wife a household allowance of L 30 (pounds) every month. Later the parties separated and the husband failed to pay the amount. The wife sued for allowance.
Judgment: Agreements such as there were outside the realm of contract altogether. Because there is no intention to create legal relationship among the parties.
3) Free and Genuine consent:
· The consent of the parties to the agreement must be free and genuine.
· Free consent is said to be absent, if the agreement is induced by a)coercion, b)undue influence, c)fraud, d)Mis-representation, e)mistake.
4) Lawful Object:
· The object of the agreement must be lawful. In other words, it means the object must not be
(a) Illegal, (b) immoral, (c) opposed to public policy.
· If an agreement suffers from any legal flaw, it would not be enforceable by law.
5) Lawful Consideration:
· An agreement to be enforceable by law must be supported by consideration.
· Consideration means “an advantage or benefit” moving from one party to other. In other words “something in return”.
· The agreement is enforceable only when both the parties give something and get something in
return.
· The consideration must be real and lawful.
6) Capacity of parties: (Competency)
· The parties to a contract should be capable of entering into a valid contract.
· Every person is competent to contract if
(a). He is the age of majority.
(b). He is of sound mind and
(c). He is not dis-qualified from contracting by any law.
· The flaw in capacity to contract may arise from minority, lunacy, idiocy, drunkenness, etc..,
7) Agreement not to be declared void:
· The agreements must not have been expressly declared to be void u/s 24 to 30 of the act.
Example: Agreements in restraint of trade, marriages, legal proceedings, etc..,
8) Certainty:
· The meaning of the agreement must be certain and not be vague (or) indefinite.
· If it is vague (or) indefinite it is not possible to ascertain its meaning.
Example:
‘A’ agrees to sell to ‘B’ a hundred tones of oil. There is nothing whatever to show what kind of a oil intended. The agreement is void for uncertainty.
9) Possibility of performance:
· The terms of an agreement should be capable of performance.
· The agreement to do an act impossible in itself is void and cannot be enforceable.
Example:
‘A’ agrees with ‘B’, to put life into B’s dead wife, the agreement is void it is impossible of
performance.
10) Necessary legal formalities:
· According to Indian contract Act, oral (or) written are perfectly valid.
· There is no provision for contracting being written, registered and stamped.
· But if is required by law, that it should comply with legal formalities and then it should be complied with all legal (or) necessary formalities for its enforceability.