Meaning Definitions and Essentials Elements of a Valid Contract

It is beneficial for U.G students of Law.

1. Meaning, Definitions and Essentials of a Valid
Contract
Mr. Amit Guleria (Double Medalist; Gold and Silver)
Assistant Professor,
Dr. B.R. Ambedkar National Law University Sonepat
Email: [email protected]

2. Why we study Law of Contract
Thisisalawwhichdealswithpromises.(Formation,performanceand
enforceability)
Itprovideslegalframeworkforcommercialtransactionsthattakeplacein
ourday-to-daylife.
It is a law that parties decide for themselves. (As they are free to decide/fix
their terms and conditions by meeting of minds).
The statutory law(s) are very significant keeping in view the competitive
exams.

3. Introductory
❖Ineverydayparlanceweenterintocontractmultipletimeswithothers.
❖Whenwepurchaseanyhouseholdarticles,i.e.milk,pulses,TV,refrigerator,
Laptop,mobileetc.Thereisacontractbetweenbuyerandseller.
(Express/ImpliedConsent).
❖Whenwebookacab,abus,atrainoranairticket,weenterintocontract.
❖Hencewecansaythat‘contract’hasbecomeavitalpartofourlife.
❖Thepartiestoacontractarefreetoenterintoacontractonanyterms&
conditionstheychoose.
❖Therightsanddutiesofpartiesandtermsofagreementaredecidedbythe
contractingpartiesthemselves.Thecourtoflawactstoenforceagreement,in
caseofnon-performance.

4. ❖IndianContractAct,1872codifiesthewaythepartiesenterintoa
contract,executeacontract,implementprovisionsofacontractandeffects
ofbreachofacontract.
❖Soitprovidesaframeworkofrulesandregulationswhichgovern
formationandperformanceofcontract.
❖Itisimportanttounderstandthatcontractneednotbeinwriting,unless
thereisspecificprovisioninlawthatthecontractshouldbeinwriting.
❖Forinstance:Contractforsaleofimmovablepropertymustbeinwriting,
stampedandregistered(eg.Saleofacar,bike,trucketc.).
❖Contractswhichneedregistrationshouldbeinwriting(Saleofimmovable
property,house,pieceoflandetc.).

5. Trust should be created in writing (Trust Deed).
A verbal contract is equally enforceable, if it can be proved.. A contract can be
enforced or compensation/damages for breach of contract can be obtained
through Civil Court.

6. Meaning and Definitions of Contact
General Meaning: Whenever two or more persons/parties agree to perform
some reciprocal obligation enforceable by law, they are said to be entered
in to contract.
A legal contract is an agreement between two or more parties in which
legal rights and obligations are created, and are enforced by a court.
Statutory definition: Indian Contract Act, 1872 ( Act 9 of 1872) Section 2
(h) “An agreement enforceable by law is a contract”

7. Juristic Views on Contract
FredrickPollock,"Everyagreementandpromiseenforceableatlawisa
contract".
Salmond,"Acontractisanagreementcreatinganddefiningobligations
betweentheparties".
Anson,"Acontractisanagreementenforceableatlaw,madebetweentwo
ormorepersons,bywhomrightsareacquiredbyoneormoretoactsor
forbearancesonthepartoftheotherorothers".

8. Offer + Acceptance = Promise
Promise + Consideration = Agreement
Agreement + Legal Enforceability = Contract
All the contracts are agreements, but all the agreements are not contracts.
Because only those agreements are contracts which are enforceable by law.
For Instance: If two parties agree to kill some third one, for the
consideration of Rs. 1 lakh. The murder is committed, but consideration
is not paid. It cannot be enforced by law.

9. Steps Involved in a Contract
Contract
Performance of Contract
Agreement by mutual promises
Acceptance of proposal and its communication
Proposal and its communication

10. Essentials of a Valid Contract
Elements of a Valid Legal Contract
For a contract to be legally enforceable the contract must contain the following elements:
1.Offer
2.Acceptance.
3.Two Parties: Meeting of Minds.
4.Lawful object.
5.Lawful Consideration.
6.Agreement not expressly declared void by Law.
7.Intention to create legal relationship.
8.Free Consent.
9.Capacity of parties to contract.
10.Possibility of performance. (Impossible agreements are frustrated, therefore void) Sec. 56, ICA, 1872.

11. Proposal/Offer:Section2(a)Whenonepersonsignifiestoanotherhis
willingnesstodoortoabstainfromdoinganything,withaviewtoobtaining
theassentofthatothertosuchactorabstinence,heissaidtomakeaproposal.
AcceptanceandPromise:Section2(b)Whenthepersontowhomtheproposal
ismadesignifieshisassentthereto,theproposalissaidtobeaccepted.A
proposal,whenaccepted,becomesapromise.
PartiestoContract:Section2(c)Thepersonmakingtheproposaliscalledthe
“promisor”,andthepersonacceptingtheproposaliscalledthe“promisee”;

12. Sec.10,ICA,1872:Whatagreementsarecontracts.—Allagreementsare
contractsiftheyaremadebythefreeconsentofpartiescompetentto
contract,foralawfulconsiderationandwithalawfulobject,andarenot
herebyexpresslydeclaredtobevoid.
Nothinghereincontainedshallaffectanylawinforcein[India]andnothereby
expresslyrepealedbywhichanycontractisrequiredtobemadeinwritingor
inthepresenceofwitnesses,oranylawrelatingtotheregistrationof
documents.