The law relating to contracts in India is
contained in Indian Contract Act 1872. The Act was passed by British India and
is based on the principles of English Common Law. It is applicable to all the
States of India except the State of Jammu & Kashmir.
It determines the circumstances in which promise
made by the parties to a contract shall be legally binding on them. Each
contract Creates some right and duties upon the contracting parties. Indian
contract Act deals with the enforcement of these rights and duties upon the
parties in India.
Essential Elements of a Valid Contract
According to Section 10 of ICA 1872, "All agreements are contracts, if they
are made by the free consent of the parties, competent to contract for a lawful
consideration with a lawful object, and not hereby expressly to be void."
Essential
Elements of a Valid Contract are:
1.
Proper offer and proper acceptance:
There must be an agreement based on a lawful
offer made by person to another and lawful acceptance of that offer made by the
latter. Section 3 to 9 of the Contract Act, 1872 lay down the rules for making
valid acceptance
2.
Lawful consideration:
An agreement to form a valid contract should be
supported by consideration. Consideration means "Some thing in return" (quid pro quo). It can be cash, kind, an
act or abstinence. It can be past, present or future. However, consideration
should be real and lawful.
3.
Competent to Contract:
To make a valid contract, the contracting
parties must be competent to enter in a contract. According to Section11 of the
Contract Act, a person is considered to be competent to enter into contract if
he satisfies the following criteria:
• The person has reached the age of maturity.
• The person is of sound mind. the person is not
disqualified from contracting by any law.
4.
Free Consent:
To constitute a valid contract there must be
free and genuine consent of the parties to the contract. It should not be
obtained by misrepresentation, fraud, coercion, undue influence or mistake.
Section 13 of the Indian Contract Act states
“two or more persons are said to be consented when they agree upon the same
thing in the same sense (Consensus-ad-idem).
5.
Lawful object and Agreement:
The object of the agreement must not be illegal
or unlawful. For instance, an agreement for smuggling activities cannot be
called as a valid contract.
6.
Agreement must not be declared void or illegal:
Agreements which have been expressly declared
void or illegal by law are not enforceable at law; hence they do not constitute
a valid contract. Void agreements are not enforceable by law as they are
opposed to public policy like agreements in restraint of trade, or in restraint
of marriage, etc.
7.
Intention to Create Legal Relationships:
When the two parties enter into an agreement,
there must be intention to create a legal relationship between them. If there
is no such intention on the part of the parties, there is no contract between
them. Agreements of a social or domestic nature do not contemplate legal
relationship; as such they are not contracts.
8.
Agreements to be in writing and Registered:
The
contract must be in writing and registered, if so required
By law. For example, gift of a property must be registered
under Transfer of Property Act, 1882 and the Memorandum and Articles of
Association of a Company must be registered with Registrar of Companies under
Companies Act 2013.
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