A contract is only valid if it fulfills some requisites and essentials necessary to form a contract. A contract will not qualify as a legal contract if it does not meet these requisites or lacks any of them.
What is a Contract?
A contract is a written agreement between two parties, which contains certain obligations and rights and can be enforced by the law.
Violation of the contract or law can attract legal action by any party, including cancellation of the entire contract. Individuals entering a written agreement should know enough about a contract's essentials.
Definition of Contract
The Contract Act of 1872 states a contract is "an agreement enforceable by law."
Essentials Elements of a Valid Contract
According to Section 10 of the Contract Act of 1872, "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”
To explain the essentials of a valid contract, we bring you the list unfolded by the Contract Act of 1872:
Offer and Acceptance of Contracts
Generally, the written contract only manifests when one party offers to do something, and the other party accepts the offer by the party and is definite in all senses. The offer or agreement must be clear and complete in all senses. Additionally, the acceptance must also be clear and validly communicated. The offer and acceptance must entail "consensus ad idem," meaning both parties must agree on and comply with the same things.
Intention to Create a Legal Relationship
For a binding contract, both parties should have a specific intention to enter into a contract and to create a legal relationship. Agreements of social or household nature are not contracts because parties do not have the intention to build legal relationships. Mulla states, "It is essential to the creation of a contract that both parties should agree to the same thing in the same sense. Thus if two persons enter into an apparent contract concerning a particular person or a ship, and it turns out that each of them, misled by a similar name, had a different person or ship in his mind, no contract would exist between them.”
The contract must be Certain.
According to section 29 of the Contract Act of 1872, If there is any uncertainty or ambiguity in terms or meaning of the agreement and both parties cannot make it specific, then it is deemed void.
As a part of the essentials of a valid consideration, the terms and conditions of the contract should be concrete and free of all doubts. Any contract, uncertain in any sense, can be termed void. The terms mentioned in the agreement should be performed exactly as intended by the parties.
Consideration
A legally binding contract must be based on some valuable consideration. Consideration means the value given for the performance of the promise. The consideration may not only be limited to money but there should be some value to the offering party in return for the performance of the contract.
The concept of consideration takes its validity from the principle of “Quid Pro Quo,” which translates into “something in return.” It means that the parties must accrue some profit, rights, interest, etc., or seem to have some valuable “consideration.”
A Consideration must fulfill these criteria:
Consideration may or may not be adequate, but it should carry some value for the parties.
Consideration can be tangible. It can also be like the performance of a service, such as teaching or labor.
Consideration is wholly according to the desire of the promisor, which means the consideration must come from the promisor. Consideration could be:
Past Consideration, when the promisor had already received consideration before the date of the performance of the contract by any party. For example, Advance money paid.
Present Consideration, when consideration is provided immediately when the contract is made or executed. Thus, it is also called “executed consideration.
Future Consideration, when consideration is paid after making the contract, in consideration given for ‘construction contracts’-Constructed building is given after the execution of the contract.
Free consent
According to section 10 of the contract act, “agreements are contracts if they are made by free consent” It means that a contract must be entered into out of the parties' own volition and without being forced or deceived into it. Section 14 of the Contract Act defined free consent as consent not given under coercion, undue influence, fraud, misrepresentation, and mistake.
The general averment that consent was not free is not maintainable to dispute the validity of a contract. It must be proved that consent was vitiated by any of the five elements mentioned in section 14: coercion, undue influence, fraud, misrepresentation, and mistake. If any of these elements obtain consent, then the contract is voidable at the option of the party whose permission was obtained by such means.
Capacity
As per section 10 of the contract act, an agreement is if it is made, among other essentials, by the free consent of parties who are competent to contract.
According to Section 11 of the Contract Act of 1872, “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.” Therefore, people who are of the age of majority (i.e., above 18 years of age) and are of sane mind, and are not disqualified to contracting by any law to which such person is subjected, are competent to contract.
Thus, a minor or a person with an unsound mind is not competent to contract or a person who has been barred from entering into a contract by laws to which he is subjected. If an agreement is entered by any such person not having the capacity to enter into a contract, such a contract is void.
The object must be Lawful.
Section 24 of the Contract Act of 1872 states that if the object of the contract, or any part thereof, is unlawful, the warranty shall be void.
Section 23 explains that the object of the agreement shall be lawful unless:
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It is forbidden by law; or
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Is of such a nature that, permitted, it would defeat the provisions of any law; or
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Is it fraudulent; or
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Involves or implies injury to the person or property of another; or
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The Court regards it as immoral or opposed to public policy
These conditions will render the contract illegal and void.
Conclusion
A contract must fulfill these essentials to form a legally binding document conferring rights and obligations on the parties. An agreement that lacks any one or all essentials is void and unenforceable.
