Essential of contract

PRESENTED BY :- 1. KANAK BINAYAKIYA

2. SHEKHAR SURANA

3. ABHAY CHAWLA

4. MUDIT BHURA

PRESENTED TO :- DIVYA UTKARSHA

Meaning of contract

Indian Contract Act defines a contract as “an agreement, enforceable by law” [Section 2(h)]

Essential of valid contract

Essentials

1.Offer and acceptance

2.Intention to create legal

relation3.Free

consent4.Lawful

consideration5.Capacity to

contract6.Legal

objective 7.Certainty 8.Possibility 9.Writing and registration

1. Offer & Acceptance Should be Present

At least two parties are needed to enter into a contact. One party has to make an offer and other must accept it.

The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree’ or ‘promisee’. There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement.

Essential of valid offer

Express or Implied Legal relations Definite and clear Communicated to the Offeree Should not contain negative conditions Subject to any conditions Must not contain cross offers Different from invitation to offer Specific or General

Essential of Valid Acceptance

Given by the Offeree Absolute & Unconditional In a prescribed manner Communicated to the Offeror Express or Implied Follow the offer Given within reasonable time

2. Intention to create legal relationship

A contract requires that the parties intend to enter into a legally binding agreement. That is, the parties entering into the contract must intend

to create legal relations and must understand that the agreement can be enforced by law.

Case Law

In Balfour V. Balfour, a husband promised to pay maintenance allowance every month to his wife, so long as they remain separate. When he failed to perform this promise, she brought an action to enforce. As it is an agreement of domestic nature, it was held that it does not contemplate to create any legal obligation

3. Free Consent

'Consent' means the parties must have agreed upon the same thing in the same sense.

Or Consent means knowledge & approval of the parties concerned.

Example:- A threatened to shoot B if he (B) does not lend him Rs 2000 & B agreed to it. Here the agreement is entered into under coercion and hence voidable at the option of B

According to Section 14, Consent is said to be free when it is not caused by-

(1) Coercion, or                  (2) Undue influence, or      (3) Fraud, or(4) Miss-representation, or       (5) Mistake.An agreement should be made by the free consent of the parties.

4. Lawful consideration

Consideration would generally mean ‘compensation’ for doing or omitting to do an act or deed.

It is also referred to as ‘quid pro quo’ viz ‘something’ in return for another thing. Such a consideration should be a lawful consideration.

Example- A agrees to sell his books to B for Rs 100. B’s promise to pay Rs 100 is the consideration for A’s promise to sell his books & A’s promise to sell the books is the consideration for B’s promise to pay Rs 100.

5. Capacity to Contract

The parties making the contract must be legally competent. Law prohibits

1. Minor

2. Person of unsound mind (excluding the Lucid intervals)

3. Person who are otherwise disqualified like an alien enemy, insolvents, convicts, etc from entering into any contract.

6. Legality of Object

The object of an agreement must be valid. Object has nothing to do with consideration. It means the purpose or design of the contract. Thus, when one hires a house for use as a gambling house, the object of the contract is to run a gambling house.

An agreement is unlawful, if it is

(i) Illegal

(ii) Immoral

(iii) Fraudulent

(iv) Of a nature that, if permitted, it would defeat the provisions of any law

(v) Causes injury to the person or property of another

(vi) Opposed to public policy.

7. Certainty

The terms of a contract must not be vague or uncertain.

If an agreement is vague and its meaning cannot be ascertained, it cannot be enforced.

8. Possibility of Performance

The terms of a contract must be such as are capable of performance. An agreement to do an impossible act is void and is not enforceable by law.

9. Writing & registration

Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even require registration. Therefore, where law requires an agreement to be put in writing or be registered, the same must be complied with.

For instance, the Indian Trusts Act requires the creation of a trust to be reduced to writing.

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