Essential Elements of a Valid Contract.pptx

This presentation on “Essential Elements of a Valid Contract under Indian Contract Law” provides a clear and concise overview of the fundamental legal requirements that make an agreement legally enforceable in India. It explains the key components such as offer and acceptance, lawful consideration, capacity of parties, free consent, lawful object, and intention to create legal relations, supported with practical examples and relevant case laws.

Ideal for students, educators, and legal professionals, this PPT simplifies complex legal principles into easy-to-understand points, making it an excellent learning and teaching resource.

Key Highlights:

Meaning and definition of a contract under the Indian Contract Act, 1872

Detailed explanation of essential elements of a valid contract

1. B usiness Law B y Ms. Keerthana C, M.Com ., NET Assistant Professor, Department of Commerce RM Sri Ramakrishna College of Arts and Science

2. Indian Contract Act, 1872 Meaning of Contract A contract is an agreement enforceable by law. It creates and defines obligations between two or more parties. A contract involves mutual promises made by parties, which are legally binding. Definition of Contract Section 2(h) of the Indian Contract Act, 1872: “An agreement enforceable by law is a contract.” This means that every contract is an agreement, but every agreement is not necessarily a contract. An agreement becomes a contract when it is enforceable by law. To summarize: Agreement = Offer + Acceptance Contract = Agreement + Legal Enforceability

3. History & Applicability Enacted : 25th April 1872 Came into force : 1st September 1872 Extent : Applicable to whole of India except the state of Jammu & Kashmir (Now fully applicable after abrogation of Article 370 in 2019). Initially it had 11 chapters, but now mainly two parts are enforced. Structure of Indian Contract Act, 1872 The Act is divided into two major parts currently in force: General Principles relating to the Law of Contracts (Section 1 to 75) Special kinds of contracts : Contract relating to Indemnity and Guarantee (Sections 124–147) Contract relating to Bailment and Pledge (Sections 148–181) Contract relating to Agency (Sections 182–238) (Earlier chapters on Contracts relating to Partnership and Sale of Goods were removed and made into separate laws.)

4. Key Definitions (Section 2 of the Act) Clause Term Definition 2(a) Proposal/Offer When one person signifies to another his willingness to do or not do something. 2(b) Acceptance When the person to whom the proposal is made signifies his assent. 2(c) Promisor & Promisee The person making the proposal is called the promisor , and the one accepting is promisee . 2(d) Consideration Something in return for the promise, like money, goods, services, etc. 2(e) Agreement Every promise and every set of promises forming the consideration for each other. 2(f) Void An agreement not enforceable by law is said to be void. 2(g) Voidable An agreement enforceable at the option of one party. 2(h) Contract An agreement enforceable by law. 2( i ) Void Contract A contract which ceases to be enforceable by law.

5. Essential Elements of a Valid Contract (As per Section 10 of the Indian Contract Act, 1872) Section 10: "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."

6. List of Essential Elements S.No Essential Element Relevant Sections 1 Offer and Acceptance Sections 2(a) and 2(b) 2 Intention to Create Legal Relations Not expressly mentioned; judicially evolved 3 Lawful Consideration Section 2(d), Section 25 4 Capacity to Contract Section 11 5 Free Consent Sections 13 to 22 6 Lawful Object Section 23 7 Not Expressly Declared Void Sections 24 to 30 8 Certainty and Possibility of Performance Sections 29 and 56 9 Legal Formalities (if required) Depends on specific laws, e.g., Registration Act 10 Mutual Obligation Inferred from Section 10 + judicial decisions

7. 1. Offer and Acceptance Sections 2(a) and 2(b) Offer/Proposal [Section 2(a)]: One person expresses willingness to do or abstain from doing something to obtain the assent of the other. Acceptance [Section 2(b)]: When the person to whom the proposal is made gives assent, it becomes a promise. No contract can exist without a proper offer and acceptance.

8. 2. Intention to Create Legal Relations (Not specifically under the Act; established by case law) There must be an intention to create legal obligations. Social/domestic agreements ≠ contracts. Business/commercial agreements = presumed to have legal intention. Balfour v. Balfour (1919): Domestic agreements are not contracts.

9. 3. Lawful Consideration Section 2(d) and Section 25 Defined in Section 2(d): Something done or promised by the promisee at the desire of the promisor. Must be lawful, real, and have some value. Section 25: Agreement without consideration is void, except in specific cases (natural love and affection, compensation for past voluntary services, etc.).

10. 4. Capacity to Contract Section 11 A person is competent to contract if: He is of the age of majority Of sound mind Not disqualified by law A minor’s agreement is void ab initio ( Mohori Bibee v. Dharmodas Ghose, 1903)

11. 5. Free Consent Sections 13 to 22 Section 13: Consent = when two or more persons agree upon the same thing in the same sense. Section 14: Consent is free when not caused by: Coercion (Section 15) Undue Influence (Section 16) Fraud (Section 17) Misrepresentation (Section 18) Mistake (Sections 20–22) Consent vitiated by any of the above makes the contract voidable or void.

12. 6. Lawful Object Section 23 An agreement is void if its object is: Forbidden by law Defeats the provision of any law Fraudulent Involves injury to person/property Immoral or opposed to public policy

13. 7. Not Expressly Declared Void Sections 24 to 30 Contracts expressly declared void include: Agreement without consideration (Section 25) Agreement in restraint of marriage (Section 26) Agreement in restraint of trade (Section 27) Agreement in restraint of legal proceedings (Section 28) Uncertain agreements (Section 29) Wagering agreements (Section 30)

14. 8. Certainty and Possibility of Performance Section 29 and Section 56 Section 29 : Agreements with uncertain or vague terms are void. Section 56 : Agreements to do impossible acts are void. Also deals with supervening impossibility (frustration of contract). 9. Legal Formalities (if required) Depends on related laws (e.g., Indian Registration Act, Stamp Act) Some contracts must be: In writing Properly stamped Registered Oral contracts are valid unless the law requires otherwise (e.g., sale of immovable property).

15. 10. Mutuality of Obligation Implied in Section 10 Both parties must be bound to perform their obligations. If only one party has an obligation, the contract is void.