Essential Elements of Valid Contract

CONTRACT, DEFINITION, ESSENTIALS & TYPES

INTRODUCTION• Transactions in the form of Contracts• Rights & Obligations• Indian Contract Act 1872

– Formation & Essentials– Performance/Promises– Special contracts

• Limitations– Creates right ‘in Personam’– Applicable to those obligations which are contractual &

legal in nature

CONTRACT DEFINED

An Agreement enforceable by law is a Contract.

COMPONENTS OF CONTRACT

Agreement - An understanding between both the parties

Obligation - Agreement must give rise to rights and obligations

Enforcement - Rights and Obligations created in Agreement must be contractual in nature.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

OUTLINE

OFFER & ACCEPTANCE

• First essential of a valid contract is agreement

CREATION OF LEGAL RELATIONSHIP

Agreement based on Social, Religious, Personal grounds cannot be enforced by law.

BAL FOUR Vs. BAL FOUR (1919) 2 K.B 571

BALFOUR V/S BALFOUR• Facts• Issues

– Must both parties intend that an agreement be legally binding in order to be an enforceable contract?

– Under what circumstances will a court decline to enforce an agreement between spouses?

• Holding & Rule– Yes. Both parties must intend that an agreement be

legally binding in order to be an enforceable contract.– The court will not enforce agreements between spouses

that involve daily life.

LAWFUL CONSIDERATION

Consideration means 'something in return.'

English Mercantile law’s definition of consideration .

The act of promise must be legal, moral and not against the public policy.

CONTRACTUAL CAPACITY

Legally competent for making a contract.

>- Must be of major age and not minor.

>- Must be of sound mind and not lunatic , idiot or drunkard.

>- Must not have been declared disqualified by law.

FREE CONSENT OF PARTIESConsent of both the parties and it must be free .

Not induced by Mistake (Otherwise it is void and cannot be enforced by law)

LAWFUL OBJECT OF AGREEMENT

Agreement generally is made for some purpose or object.

Object of an agreement should be to do some act which is legal.

Agreements made for doing something illegal , immoral or against public policy is not acceptable in court of law

AGREEMENT NOT DECLARED EXPRESSLY VOID

• Agreements which are expressly declared void by law.• No legal existence or sanctity.• Agreements made by parties should not fall under this

category

08/04/23 03:51Raza Lilani . razamr@hotmail.com

CERTAINTY IN THE MEANING OF AGREEMENT

OTHER LEGAL FORMALITIES

• Some agreements need to satisfy conditions of being in writing, registered & duly stamped.

• No discrimination between oral & written agreements in general according to Indian Contract Act.

CLASSIFICATION OF CONTRACTS

Formation of contract

Performance of contract

Extent of validity of contract

ON THE BASIS OF FORMATION OF CONTRACTExpress contracts:-“in so far as the proposal and acceptance of any promise is made in words, the promise is said to be express leading to an express contract”

Implied contract:-“promises that are not made in writing but are inferred from the conduct of parties”

Quasi contracts:-“based on the principle of equity and justice, in spite of not having the contract rights and obligations are created”

ON THE BASIS OF PERFORMANCE OF CONTRACT

Executed contract:-“an executed contract is the one that has been performed”

Executory contract:-“a contract that has still not completed”Even if one party performs its side of contract and the other party has not performed its part of the contract its called executory contract.

ON THE BASIS OF EXTENT OF VALIDITY

Valid Contract: Contract is said to be valid if it satisfies all conditions required for its enforceability.

Void Contract: A contract which ceases to be enforceable by law becomes void.

Void agreement: Agreement which lacks any one of essentials of a valid contract except free consent it becomes void agreement.

Voidable Contract: An agreement which is enforceable by law at the option of one or more parties, but not at the option of other or others is a voidable contract.

Unenforceable Contract: Due to technical reasons it may not be allowed to be enforced in the court.

Illegal Contract: Contract is said to be illegal if its object is illegal.

CONCLUSION

Distinction between Void Agreement and Voidable contract.

Distinction between Void and Illegal agreements.