1 Essentials of a Valid Contrct

7/31/2019 1 Essentials of a Valid Contrct

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We enter into contracts so many timesin a day that contract has become an

indispensable part of our life. When youpurchase milk or newspaper in themorning or go to movie in the evening,

you are entering into a contract. IndianContract Act really codifies the way weenter into a contract, execute a contract,implement provisions of a contract andeffects of breach of a contract. Basically,a person is free to contract on any termshe chooses.


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The Contract Act consists of limiting factorssubject to which contract may be entered

into, executed and breach enforced. It onlyprovides a frameworkof rules andregulations which govern formation andperformance of contract. The rights andduties of parties and terms of agreementare decided by the contracting partiesthemselves. The court of law acts to

enforce agreement, in case of non-performance.


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It must be noted that contract need notbe in writing, unless there is specific

provision in law that the contractshould be in writing. [e.g. * contract forsale of immovable property must be inwriting, stamped and registered. *Contracts which need registrationshould be in writing * Bill of Exchangeor Promissory Note must be in writing.

* Trust should be created in writing *Promise to pay a time barred loanshould be in writing, as per Limitation

Act *


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Contract made without

consideration on account ofnatural love and affection shouldbe in writing ].

A verbal contract is equallyenforceable, if it can be proved.. Acontract can be enforced orcompensation/damages for breachof contract can be obtainedthrough Civil Court


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CONTRACT ACT

This Act may be called the Indian

Contract Act, 1872.

Extent, Commencement. -It

extends to the whole of India

[except the State of Jammu andKashmir]; and it shall come into

force on the first day of

September 1872.


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What is rem and what is personam?

Rem means a right upon a thing against the

whole worldPersonam is the right against a person.

Example:

Anand purchases a house from AmarHe has a right of rem

i.E he is the owner of house against the world

Akbar takes a loan from ICICI bank

ICICI bank can recover the loan from Akbaronly

It cannot recover from any other person.


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What is a promise?

When one person signifies to another his willingnessto do or not to do something with a view to obtainthe assent of the other to such act or abstinences heis said to make a proposal = promise = offer

What is consideration?

Consideration is some thing in return- quid pro quo,

When an offer is made by one person to another andwhen such offer is accepted by the other

It will result in an agreement


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According to section 10 of Contract Act,

all agreements are contract if they are made

by

Free consent of parties

Competent to contract

For lawful consideration and

With a law full object and

are not expressly declared to be void


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The following are the essentials/components/legal rules

1.PLURALITY OF PERSONS

An agreement is the common intention of two or morepersons. For making a valid contract there must be atleast two persons.

2.Consensus ad idem

It means two persons must understand the same thingin the same sense.

Example : Amitab bachan is having two cars onewhite car and one red car. He wants to sell his red car.Sharukhan wants to buy the white car from Amitabbachan.


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In the conversation when Sharukkhan says I want tobuy one car from you, Amitab bachan says ok Iwant to sell one car. Agreement is reached for 3lakhs of rupees. When delivery date came, Amitabsends the red car to sharuk , where as sharuk wasexpecting white car. The contract here is not valid asthere is no consensus ad idem i.e , meeting of the

mind is not there, one is thinking white car and otheris thinking it is red car.

3. It must be capable of creating legal relationship

or legal consequence.There must be intention to create legal obligationand there must be an intention to create legalrelationship when the contract is made.


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The social obligation is not a contract; simplyjoking is not a contract, The famous case on thispoint is

BALFOUR VS BALFOUR

A husband agreed to pay 30 every month to hiswife while he was abroad. On failure to pay the

amount the wife filed a suit in the court to recoverthe amount. The court held, that she cannotrecover the amount since it was domesticagreement or a social agreement and not

capable of enforcing.4. Law full consideration

The agreement must be supported byconsideration to be a valid agreement.


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The consideration must be a Law full consideration.The consideration must be real and it must be within

the frame work of law if not it is not valid.Example :Don agreed to kill Dawood for 10 Lakhs ofrupees, Here the agreement is not valid becausekilling one person is not permitted in law, not allowed

in IPC.5. The Parties must be competent to enter intocontract.

The parties to the contract must have legal capacityto enter into a valid contract, In law certain personsare not having legal capacity to make a contract ,for example a MINOR is not having capacity to enterenter into a contract, a person of UNSOUND MIND


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an, Insolvent , An alien enemy, a lunatic , an idiot etcare not having competence to make a contract.

6. Free Consent

When one party agrees to do something , he mustagree on his own with his free mind. If he I forced toenter into a contract which he is not willing such

consent is an invalid consent and contract will notresult. It should not be influenced , or there should notbe a miss representation or Fraud in getting theconsent. If the consent is obtained by using any ofthese methods it is not a valid contract.

7. Law full Object

The purpose of the contract must be for a lawful


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Purpose if the intention of the parties is to cheatsome one or Govt. it is not a valid contract. Insimple , the object of the contract must not beillegal or it must not be against public policy.

8. It must not have been declared by law as VOID

The law has declared certain agreement as voidagreement and hence no one van enter into suchagreement,

Example Agreement by minor, agreement by

mistake, etc.


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9.It must be do a possible thingIf there is an agreement to do theimpossible act it is void.

Example:Bringing moon from sky,Bringing stars from sky

convert brass into gold .


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10. Legal Formalities

Sometimes the contract needs to be in accordancewith some law or rules, in such case it must be havingall legal formalities.

Example : a negotiable instrument must in writing

A gift deed must have two witness

A sale deed must have two witness and must be on astamp paper

The property sale or transfer must be on stamp paperand also needs registration at sub-Register office.


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1 Essentials of a Valid Contrct

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