ring
Valid Contract

Requirements for a Valid Contract

Requirements for a Valid Contract

A valid contract is an agreement, which is binding and enforceable. In a valid contract, all the parties are legally bound to perform the contract. The Indian Contract Act, 1872 defines and lists the essentials of a valid contract through interpretation through various judgments of the Indian judiciary. Section 10 of the contract act enumerates the points of essentials for valid contracts. In this article, we will look at the various requirements for a valid contract in detail.

Contract – An Outline

The contract act, 1872 defines, as ‘an agreement enforceable by law is a contract’. Thus for a valid contract, there has to be an agreement which is enforceable by law. Further, for enforceability, an agreement must possess the essential elements of a valid contract as contained in the contract act, 1872.

Contract = Agreement + Enforceability

Formation of a Valid Contract

According to the Contract Act, 1872, the requirements for a valid contract are the Agreement and Enforceability:

Agreement

The first recruitment of a valid contract is an agreement. Every promise and all set of promises, forming the consideration for each other is an agreement. When a person to whom the proposal is made defines his assent, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

An agreement is valid when one party makes a proposal or offer to other party signifies his assent. The following are required for a valid agreement.

  • The agreement must be between two persons. It is required to be between an offeror and an of free, who accepts the o0ffers becomes an acceptor. Both these parties should be different persons, as one cannot enter into an agreement with himself.
  • Both the offeror and offeree in the same sense and at the same time should understand the agreement.

Enforceability

An agreement to mature into a contract must create legal obligation as per the provision of contract laws that is a duty enforceable by law. Any agreement which does not create any enforceability, i.e. where the parties do not have a right to approach the court of law to avail legal remedy for breach of contract will not be a contract.

Essentials of a Valid Contract

A brief on all essentials of a valid contract is as follows:

Offer and Acceptance

All offers must be valid and once accepted, it binds both the parties into a valid agreement. The offree is now an acceptor, and thus the agreement is made between an offeror and an acceptor. The adjective lawful suggests that the offer and acceptance must satisfy the recruitments of the contract act in relation.

Legal relationship

Parties to a contract must desire to constitute a legal relationship. It results when the parties know that if any one of them fails to fulfil his/her part of the promise, he/she would be liable for the failure of the contract.

If there is no desire to create a legal relationship, there is no contract between the parties. Agreements of social or domestic natures, which do not contemplate a legal relationship, are not contracts.

Lawful consideration

Consideration is described as something in return. It is also vital for the validity of the contract. A promise to do something or to provide something without anything in return will not be enforceable at law and, therefore, will not be valid.

Consideration need not be in kind or cash. A contract without consideration is a wagering contract or betting. Besides, the consideration must also be lawful.

Competency of parties

The parties to an agreement should be capable of contracting. In other words, they should be capable of entering into the contract.

According to the Contract act, every person is competent to contract who is the age of majority to which he/she is subject to and who is of the sound mind and is not disqualified from the contracting by any law to which he/she is subject.

Thus, according to the contract act, every person with the exception of the following is competent to enter into a contract:

  • A minor
  • A person of unsound mind
  • A person expressly declared disqualified to get into a contract under any Law

Free consent

Another essential of the valid contract is the consent of parties, which should be free. As per the Contract Act, two or more parties are said to consent when they agree upon the same things in the same sense. The consent is considered free when any of the following things do not induce it:

  • Coercion
  • Misrepresentation
  • Fraud
  • Undue influence
  • Mistake

Lawful objects

According to Contract act, an agreement may become a valid-contract only, if it is for a lawful consideration and lawful object. The below-mentioned considerations and objects are not lawful as per the Contract Act

  • If it is forbidden by law
  • If it is against the provision of any other laws
  • If it is fraudulent
  • If it damages somebody’s person or property
  • If it is in the opinion of courts, immoral or against the public policies

If an agreement is illegal, immoral or against public policy, such agreement becomes an invalid valid contract.

Writing and Registration

The agreements may be oral or in writing. When the agreement is in writing it should comply with all legal formalities as to attestation and registration. If the agreement does not abide by the requisite legal formalities, the law cannot enforce it.

Certainty

To give rise to the valid contracts, the terms of the must not be vague or uncertain. Ascertaining the meaning of the agreement for must be possible. Otherwise, it cannot be enforced.

Possibility of Performance

A valid contract must be capable of performing. An agreements to do an act impossible in itself are void. If the act is impossible in itself, physically, practically or legally then the agreement is not enforceable.

Not expressly declared void

The agreement must have been expressly declared to be void under the contract laws. This act specifies certain types of agreement that have been expressly declared to be void. The following agreements have been declared as void under the Contract Act.

  • An agreement in restraint of marriage
  • An agreement in restraint of trade
  • An agreement by way of wager

Other Related Guides

Capacity to Contract Capacity to Contract Capacity to contract means the competency to enter into a valid contract legally. The capacity to contract binds the parties of ...
Breach of Contract Breach of Contract A breach of contract occurs when one of the parties of the contract do not abide by the terms of the contract. The breach in a con...
Contract of Indemnity and Guarantee Contract of Indemnity and Guarantee The contract of indemnity and the contract of the guarantee are the special contracts under the Indian Contract A...
Contract of Agency Contract of Agency Contract of the agency is a legal relationship, where one person appoints another to perform on the transactions on his behalf. Th...
Essentials of a Valid Offer Essentials of a Valid Offer A contract is initiated by an offer or proposal. For this purpose, when a contract is formed between two or more parties,...

Post by Renu Suresh

Renu is experience content writer specialised in compliances and company rules.

User

Hi there,

Online We are available online!