Essential Of Valid Contract

by • 28/05/2012 • B.com part 2 Business LawComments (0)709

Q2- Discuss the essential of valid contract? Or describe the requirement of a valid contract.

 

VALID CONTRACT ESSENTIALS

 

According to section 10 of Contract Act:

 

“All agreements are contract if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void.”

 

Following are the condition for validity of the contract.

 

1-      PROPOSAL:

There must be atleast two parties, one making the offer and the other accepting it. Such offer and acceptance must be valid. An offer to be valid must fulfill certain conditions, such as it must intend to create legal relations, its terms must be certain and unambiguous, it must be communicated to the person to whom it is made etc. An acceptance to be valid must fulfill certain conditions, such as it must be absolute and unqualified, it must be made in the prescribed manner, and an authorized person before the offer lapses must communicate it.

Example:

Mr. Naveed offers for marriage to Miss.Nida. It is a proposal because Mr. Naveed signified to Miss. Nida for her willingness to do the marriage. In this example Mr. Naveed is a promisor and Miss. Nida is a promisee.

 

 

2-      ACCEPTANCE:

When the promise signified its ascent, the proposal is said to be an accepted, must be according the Contract Act rules.

 

Example:

“A” says to “B” that he wants to sell his motorcycle to him for Rs. 50,000. “B” agrees to buy it. This is an offer by “A” and acceptance by “B”

 

3-      AGREEMENT:

After the acceptance of proposal it will be only promise. For the contract these must be an agreement enforceable at law.

 

Example:

Suppose there is an agreement between Alam and Ali that Alam will construct a house for Mr. Ali and Mr. Ali will pay Rs. 50,000 to Mr. Alam, the agreement is a contract.

 

4-      AGREEMENT MUST BE IN WRITING:

For the validity of contract it is necessary that it must be in writing and reghistered with the registrar, if the law requires it.

Example:

“A” verbally promises to sell his house to “B”, it is not a valid contract, as the law requires such contract of immovable property in writing.

 

5-      LAWFUL AGREEMENT:

Lawful agreement is essential for the valid contract, because unlawful agreement cannot be enforceable by law.

 

Example:

“A” and “B” entered into an agreement that is “A” will beat “C” then “B” will pay Rs. 10,000. This agreement is unlawful, as the object is unlawful.

 

6-      LEGAL RELATIONSHIP OR INTENTION TO CREATE LEGAL RELATIONSHIP

There must be an intention among the parties to create a legal relationship. In case of social or domestic agreements, the usual presumption is that the parties do not intend to create legal relationship but in commercial or business agreements, the usual presumption is that the parties intend to create legal relationship unless otherwise agreed upon.

 

Example:

X invites Y to dinner, Y accepted the invitation. It is a social agreement. Is X falls to serve dinner to Y, Y cannot be going to the courts of law for enforcing the agreement. Similarly, if Y fails to attend the dinner, X cannot go to the courts of law for enforcing the agreement.

 

7-      COMETENCY OF THE PARTIES OR CAPACITY OF PARTIES

According to the Contract Act:

“Only competent parties can enter to the contract”.

 

According to Contract Act following persons are competent:

 

  • Anyone who attained the age of majority.
  • Who are of sound mind?
  • Who are not disqualified by law to enter into any contract?

 

8-      CONSIDERATION OR LAWFUL CONSIDERATION

According to Section 23 of the Contract Act:

“It is also essential for valid contract when at the wish of the promisor the promise does or obtains form doing, such act or promise is called consideration for the promise”.

 

It may be past or present.

 

Example:

X agrees to sell his car to Y for Rs 1, 00,000. Here, Y’s promise to pay Rs. 1, 00,000 is the consideration for X’s promise to sell the care and X’s promise to sell the care is the consideration for Y’s promise to pay Rs.1, 00,000

 

 

9-      FREE CONSENT

According to Section 14 of the Contract Act:

 

“If free consent of any party is absent then contract is invalid”.

 

If contract is by fraud, under influence or coercion then it will be invalid. So consent is said to be free when it is not caused by:

 

  • Coercion
  • Undue influence
  • Fraud
  • Misrepresentation
  • Mistake

 

Example:

X threatens to kills Y if he does not sell his house to X. Y agrees to sell his house to X, in this case, Y’s consent has been obtained by coercion and therefore, it cannot be regarded as free.

 

10-  CERTAIN AND DEFINITE OR CERTAINITY OF MEANING

 

According to Section 29 of the Contract Act:

 

“Contract meaning should be clear, it should also be certain and definite.”

 

If the performance of the contract is not possible then it cannot be called as valid contract.

 

Example:

X a dealer in different types of oils agreed to sell 100 tones of oil to Y, this agreement is void on the ground of uncertainty because it is not clear what kind of oil id indented to be sold.

 

11-  NOT DECLARED VOID OR AGREEMENT NOT EXPRESSLY DECLARED VOID:

According to Section 24 to 30 of the Contract Act it is also essential that agreement must have not been declared void by any law in the country.

 

Example:

X promised to marry none else Y and in default pay her Rs.1, 00,000. X married to Z and Y sued X for the recovery of Rs.100, 000. It was held that Y was not entitled to recover anything because this agreement was in restrain of marriage and as such void.

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