Table of Contents
Introduction
An Agreement is the result of the proposal made by one party to the other party and that the other party gives his acceptance thereto for mutual consideration.
Agreement = Offer + Proposal
An agreement to become a valid contract must be bound to a legal obligation which means duly enforceable by law.
In this blog, we shall discuss in detail the elements which constitute a valid contract enforceable in law.
Section 10 of the Indian Contract Act, 1872 provides that an agreement in order to be a contract must satisfy the following conditions: (1) the parties must be competent to contract; (2) it must be made with the free consent of the parties; (3) it must be made for a lawful consideration and with a lawful object; (4) it should not have been expressly declared void by law.
CAPACITY TO CONTRACT
Capacity refers to the capability of the parties to make a contract. It is one of the essential elements of a valid contract.
“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”.
Section 11 Every person is competent/capable to contract who- (A) has attained the age of majority, (B) is of sound mind and (C) is not disqualified from contracting by any law to which he is subject
Attained the Age of majority
In India, the age of majority is regulated by the Indian Majority Act, 1875. Every person residing in India shall attain the age of majority on the completion of 18 years of age and not before. The age of majority being 18 years, a person less than that age even by a day would be minor for the purpose of contracting
Sound mind
According to Section 12 of the Indian Contract Act, “a person is said to be of sound mind for the purposes of making a contract if, at the time when he makes it is capable of understanding it and of forming a rational judgment as to its effect upon his interests.” A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
Example 8
A patient in a lunatic asylum is a sound mind at the interval and may contract during those intervals.
Example 9
A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts
A contract by a person who is not of sound mind is void.
Not disqualified from contracting by any law to which he is subject
Minors and persons of unsound mind, there are also other persons who are disqualified from contracting, partially or wholly, so that the contracts by such person are void. Incompetency to a contract may arise from political status, corporate status, legal status, etc.
The following persons fall in this category:
Foreign Sovereigns and Ambassadors,
Alien enemies,
Corporations,
Convicts,
Insolvent, etc.
FREE CONSENT- VALID CONTRACT
Consent define in Section 13: “two or more persons are said to consent when they agree upon the same thing in the same sense.”
One of the essential elements of a contract is consent and there cannot be a contract
without consent. Consent may be free or not free. Only free consent is necessary for the validity of a contract.
Definition of ‘Free Consent
Section 14: Consent is said to be free when it is not caused by
- Coercion, as defined in Section 15; or
- Undue Influence,
- Fraud,
- Misrepresentation,
- Mistake
LEGALITY OF OBJECT AND CONSIDERATION
The consideration or object of an agreement is lawful, unless
- It is forbidden by law; or
- Is of such a nature that, if permitted, it would defeat the provisions of any law; or
- Is fraudulent; or
- Involves injury to the person or property of another; or
- The court regards it as immoral; or
- Opposed to public policy.
NOT EXPRESSLY DECLARED VOID
Expressly declared Void Agreements means-
- Made by incompetent parties
- Agreements made under Bilateral mistakes of fact
- Agreements the consideration or object of which is unlawful
- Agreement the consideration or object of which is unlawful in parts
- Agreements made without consideration
- Agreement in restraint of marriage
- Agreements in restraint of trade
- Agreement in restraint of legal proceedings
- Agreement the meaning of which is uncertain
- Wagering Agreement
- Agreements to do impossible Acts
Conclusion
All contracts must contain these essential elements.
- Offer
- Acceptance
- Consideration
- Capacity
- Legality
The public to know the basic elements of a contractual agreement, in order to avoid pecuniary losses or unprofitable deals and to protect one from attacks from the bad elements of society.
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CONSIDERATION UNDER INDIAN CONTRACT ACT, 1872