CENTRAL UNIVERSITY OF

SOUTH BIHAR
CONTRACT-I PROJECT

TOPIC – ESSENTIALS OF VALID

CONTRACT
SESSION – 2018-2023
B.A.LLB. (2nd Semester)
Enrolment No. – CUSB1813125012
Submitted by- Aman Raj
Submitted to- Mrs. Minakshi
(Assistant Professor)
1|P a ge
 PREFACE
As a part of the LL.B. Curriculum (as prescribed by The Bar Council of India) and in order
to gain practical and research knowledge in the field of law, I’m required to make a project
on this topic. Here, I have got the topic, “Essentials of Valid Contract”. I required making
a project on this specified topic. The Basic Objectives behind doing this project is to get
more knowledge about history and evolution of law, its concepts and definition of rule of
law.

In this project I have included various concepts, effects and implications regarding celebrity
endorsement and analyses of the decision regarding this case.

Doing this Project helped me to enhance my knowledge regarding interpretation of section 3-

9 of Indian Contract Ac 1872 and implications of applying analytical and factual occurrence
in this specified topic.

I also took the help of e- resource in finishing this project; there I visited many websites
which helped me a lot in getting authentic case judgement.

I also want to thank my parents for providing everything whatever is required for the
completion of this project.

Finally, I would like to thank all the kith and kens who are a little bit part in helping me for
the completion of this project.

2|P a ge
 ACKNOWLEDGMENT

This project is all about the “Essentials of Valid Contract”. I take extreme pleasure in
expressing my profound gratitude towards my teacher Mrs. Minakshi (Assistant Professor,
Law) who gave me the golden opportunity to do the wonderful project on this topic, which
also helped me in doing a lot of research and I came to know about so many new things. I am
really thankful to her.

Secondly I would also like to thank my friends who helped me a lot in finalizing this project
within the limited time frame.

I owe my deep gratitude to our seniors and librarians who took keen interest on my project
work and guided me all along, till the completion of my project work by providing all the
necessary information for making a good project.

I also took the help of e- resource in finishing this project, there I visited many websites
which helped me a lot in getting authentic case laws.

I also want to thank my parents for providing everything whatever is required for the
completion of this project.

Finally, I would like to thank all the kith and kens who are a little bit part in helping me for
the completion of this project.

3|P a ge
 Table of Content
S.No. Content Page Number
01. INTRODUCTION (essentials of valid contract) 05
02. Proper offer & acceptance 06-08
03. Lawful Consideration 08
04. Competent to conract or capacity 09
05. Free Consent 09-10
06. Lawful objects and Agreements 10-11
07. Agreement not declared void or illegal 11-12
08 Intention to Create Legal Relationships 12-13
09 Bibliography 14

4|P a ge
 ESSENTIALS OF VALID CONTRACT

According to Section 10, “According to Section 10", all agreements are contracts, if they are
made by the free consent of the parties, competent to contract, for a lawful consideration with
a lawful object, and no thereby expressly to be void. " are contracts, if they are made by the
free consent of the parties, competent to contract, for a lawful consideration with a lawful
object, and no thereby expressly to be void."

Before getting to the part of “Essentials of a valid contract” let’s take look about Contract
itself.

What is a Contract?

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An
agreement enforceable by law”. In other words, we can say that a contract is anything that is an
agreement and enforceable by the law of the land 1.

This definition has two major elements in it – “agreement” and “enforceable by law”. So in
order to understand a contract in the light of The Indian Contract Act, 1872 we need to define
and explain these two pivots in the definition of a contract.

A contract is an accepted proposal (agreement) that is fully understood by the law and is legally
defined or enforceable by the law. So a contract is a legal document that bestows upon the parties
special rights (defined by the contract itself) and also obligations which are introduced, defined
and agreed upon by all the parties of the contract.

1 th
Law of contract I by Dr. S.S. Srivastava 7 edition 2018

5|P a ge
 ESSENTIALS REQUIRED FOR A VALID CONTRACT
A contract that is not a valid contract will have many problems for the parties involved. For
this reason, we must be fully aware of the various elements of a valid contract. In other
words, here we shall ponder on all the ramifications of the definition of the contract as
provided by The Indian Contract Act, 1872.

The Indian Contract Act, 1872 itself defines and lists the Essentials of a Contract either
directly or through interpretation through various judgments of the Indian judiciary. Section
10 of the contract enumerates certain points that are essential for valid contracts like Free
consent, Competency Of the parties, Lawful consideration, etc. Other than these there are
some we can interpret from the context of the contract which is also essential Let us see.

1. Proper offer and proper acceptance:

There must be an agreement based on a lawful offer made by person to another and lawful
acceptance of that offer made by the latter. Section 3 to 9 of the contract act, 1872 lay down
the rules for making valid acceptance.
A Proposal or an offer has to be distinguished from an invitation to offer or treat2.

The person making the offer/proposal is known as the “promisor” or the “offerer”. And the
person who may accept such offer will be the “promisee” or the “acceptor”

The offerer will have to express his willingness to do or abstain from doing an act. Only
willingness is not enough. Or simply a desire to do/not do something will not constitute an
offer.

An offer can be positive or negative. It can be a promise to do some act, and can also be a
promise to abstain (not do) some act/service. Both are valid offers.

Same way as in offer acceptance is important in a proper way. Accepting another party’s offer
makes a contract complete. The party that accepts the offer must accept it on the same terms as
the terms of the original offer. They must make sure that the other side knows they accept it.
2 th
Contract 1 by R.K. Bangia 7 edition 2017

6|P a ge
If they propose different terms, there’s no contract. Instead, their terms are a counteroffer. It’s
then up to the first party to accept the counteroffer or propose another counteroffer.

There are few cases based on offer and acceptance, let us take a look:-

Harvey v. Facey3
FACT:-
In this case, it was held that the quotation of the price was held not to be an offer. The
plaintiff wanted to buy the property “Bumper Hall Pen” which belonged to the
defendant, he sent a telegram saying “will you sell us bumper hall pen? What is the
lowest price?” The defendants replied by “Lowest price for Bumper Hall pen is $900”
JUDGEMENT:-
It was observed that the second telegram from defendants quoting the lowest price was
an offer and the same had been accepted by the Plaintiff, hence the contract was
complete. In the case it was eventually held that the exchange of aforesaid telegrams
had not resulted in formation of a contract. It was observed that the first telegram had
asked two questions, one regarding willingness to sell and other regarding the lowest
price. In reply only lowest price was quoted and this quoting of the price was not an
offer. That the third telegram from the Plaintiffs saying we agree to buy was only an
offer and not the acceptance of an offer. Since this offer had not been accepted by
defendants, there was no binding contract between the parties.
Lalman Shukla v. Gauri Dutt-
FACT:-
Under the Law of Contract an offer can be accepted only after the same has come to
the knowledge of the offeree. It means that the offer has to be communicated to the
offeree in order that the offeree can accept it. Section 4 of the Indian Contract Act
states that the communication of a proposal id completes when it comes to the
knowledge of the person to whom it is made.
JUDGEMENT:-
The plaintiff who was defendant’s servant was sent to search for the missing boy. After
the plaintiff had left in search of the boy, the defendant issued handbills announcing a
reward of Rs. 501 to anyone who might find out the boy. The plaintiff who was
unaware of this reward, was successful in searching the boy. When he came to know
3 th
Contract 1 by R.K. Bangia 7 edition 2017

7|P a ge
 of the reward, which had been announced in his absence, he brought an action against
the defendant to claim this reward. It was held that since the plaintiff was ignorant of
the offer of reward, his act of bringing the lost boy did not amount to the acceptance of
the offer and therefore he was not entitled to claim the reward.

2. Lawful consideration:

An agreement to form a valid contract should be supported by consideration. Consideration

means “something in return” (quid pro quo). It can be cash, kind, an act or abstinence. It can
be past, present or future. However, consideration should be real and lawful.

Durga Prasad v. Baldeo4:-

In the case it was held that it is essential that the consideration must have been given
at the desire of the promisor, rather than merely voluntarily or at the instance of some
third party.
D had built at his own expense, a market at the request of the Collector of the District.
The shopkeepers in the market promised to pay D a commission on all articles sold by
them in the market. D sued the shopkeepers for non-receipt of commission.
It was held that the promise to pay commission did not amount to a contract for want
of consideration, because D (the promisee) had constructed the market not at the
desire of the shopkeepers (the promisors) but at the desire of the Collector of the
District to please him.
CHINNAYYA Vs. RAMAYYA5 - A, an old lady, by a deed of gift, made over
certain property to her daughter R, with a direction that the daughter should pay an
annuity to A’s brother (R’s maternal uncle) as has been done by A so far. R, the
daughter, executed writing in favour of her maternal uncle C agreeing to pay the
annuity. Afterwards she declined to fulfil her promise saying that no consideration
had moved from her maternal uncle i.e. the promisee.
Held that the words “the promisee or any other person” in Sec.2(d) clearly show that a
stranger to consideration may maintain a suit. Hence the maternal uncle, though a
stranger to the consideration (as the consideration indirectly moved from his sister A)
was entitled to maintain the suit.

4
www.indiankanoon.com
5
www.scribd.com

8|P a ge
 3. Competent to contract or capacity:

In order to make a valid contract the parties to it must be competent to be

contracted. According to section 11 of the Contract Act, a person is considered to be
competent to contract if he satisfies the following criterion:-
The person has reached the age of maturity, the person is of sound mind. The
person is not disqualified from contracting by any law.
Mohiri Bibee v. Dharmodas Ghose6:-
The minor misrepresented while taking the loan, but the fact that the person taking the
loan is a minor was known to money lender. The Privy Council did not consider this
necessary to decide whether section 115 of Indian Evidence Act, was applicable to the
present case, because the money lender was not misled by the false statement by the
minor as he was aware of the age of the borrower.

Suraj Narain v. Sukhu Aheer 7:-

A person borrowed some money during his minority and made a promise to return the
money along with interest after attaining majority. The question before Allahabad
court was, whether, consideration received by a person during his minority can be
good consideration for a fresh promise by him after attaining majority. It was held by
a majority of 2:1, that the consideration received by a person during his minority
could not be called as consideration in its strict terms within the meaning of Section
2(d), and there was no question of what consideration being considered valid for a
fresh promise. The promisor therefore, could not be held liable in respect of such
promise.

4. Free Consent:

To constitute a valid contract there must be free and genuine consent of the parties to the
contract. It should not be obtained by misrepresentation, fraud, coercion, undue influence or
mistake.

6 th
Contract 1 by R.K. Bnagia 7 edition 2017
7 th
Law of Contract by Avatar Singh 5 edition

9|P a ge
 Ranganayakamma v. Alwar Setti8:-
The question before the Madars High court was regarding the validity of the adoption
of a boy by a widow, aged 13 years. On the death of her husband, the husband’s dead
body was not allowed to be removed from her house for cremation, by the relatives of
the adopted boy until she adopted the boy. It was held that the adoption was not
binding on the widow as her consent had been obtained by coercion.
Mannu Singh v. Umadat Patel9:-
The plaintiff, an aged person executed a deed of gift in respect of the whole of the
world of his property in favour of the defendant, who was plaintiff’s guru or spiritual
advisor. The only reason of his gift was his desire to secure benefits to his soul in the
next world and also in view of plaintiff having heard recitation of the holy book,
Bhagwat. Soon after the execution of the said deed, the plaintiff applied for the
cancellation of the same by a suit brought by him under Section 39 of the Specific
Relief Act 1887.
Philips Vs. Brooks
A person obtains goods by fraud, and before the seller rescinds the contract, disposes
them off to a bona fide party, the seller cannot rescind the contract. Rule: Before the
contract is rescinded, third parties, bonfire for value, acquire rights in the subject
matter of the contract, those rights are valid against the party misled, and the right to
rescind will no longer be available”.

5. Lawful Object and Agreement:

The object of the agreement must not be illegal or unlawful. An agreement to form a valid
contract should be supported by consideration. Consideration means “something in return”
(quid pro quo). It can be cash, kind, an act or abstinence. It can be past, present or future.
However, consideration should be real and lawful
Karamchand Vs. BasantKaur
In this case goods were supplied voluntarily to the promisor during his minority. The
promise to pay for these was made by him after attaining majority. Whether this
promise can be enforced?

8
www.scribd.com
9
www.britannica.com

10 | P a g e
 The court observed that they failed to see how an agreement made by a person of full
age to compensate wholly or in part a promisee, who had already voluntarily done
something for the promisor, even at a time when the promisor was a minor, did not
fall within the purview of Sec.25(2) of the contract Act.

Rajalakhi Devi v. Bhoothnath10

There were frequent quarrels and disagreement between Bhoothnath and his wife
Rajalakhi Devi. He finally executed a registered document in favour of his wife
agreeing to pay for the separate residence and maintenance. Rajalakhi Devi went to
court and insisted on specific performance by her husband of what is stated in the
registered document.
JUDGEMENT Held that the agreement was void for want of consideration because it
was not made out of natural love and affection.
Kedarnath v. Gorie Mohammad.
Gorie Md. Promised to contribute Rs.100 towards construction of a Town Hall at
Howrah but did not sent in his contribution.
Kedarnath, the Secretary of the Town Hall on the faith of the promise, entrusted the
work to a contractor and incurred liability to pay him.

6. Agreement not declared void or illegal:

Agreements which have been expressly declared void or illegal by law are not enforceable
at law; hence they do not constitute a valid contract.
 A minor’s contract is void by Ab initio.
 An agreement with unsound mind is void.
 The persons who are assumed as disqualified to enter into contract e.g. Alien friend
can enter into contract but not alien enemies, A convicted person in prison
Mohiri Bibee v. Dharmodas Ghose 11:-
The minor misrepresented while taking the loan, but the fact that the person taking the
loan is a minor was known to money lender. The Privy Council did not consider this
necessary to decide whether section 115 of Indian Evidence Act, was applicable to the

10 th
Contract 1 by Dr. R.K. Bangia 7 edition
11 th
Contract 1 by R.K. Bnagia 7 edition 2017

11 | P a g e
 present case, because the money lender was not misled by the false statement by the
minor as he was aware of the age of the borrower.
Suraj Narain v. Sukhu Aheer 12:-
A person borrowed some money during his minority and made a promise to return the
money along with interest after attaining majority. The question before Allahabad
court was, whether, consideration received by a person during his minority can be
good consideration for a fresh promise by him after attaining majority. It was held by
a majority of 2:1, that the consideration received by a person during his minority
could not be called as consideration in its strict terms within the meaning of Section
2(d), and there was no question of what consideration being considered valid for a
fresh promise. The promisor therefore, could not be held liable in respect of such
promise.

7. Intention to Create Legal Relationships:

When the two parties enter in to an agreement, there must be intention to create a legal
relationship between them, if there is no such intention on the part of the parties. there is no
contract between the parties.
Balfour v. Balfour 13-
The concept of intention to create legal relationship was implied in the case of Balfour
v. Balfour. In this case, the defendant who was employed on a government job in
Ceylon went to England with his wife on leave. For health reasons the wife was
unable to accompany the husband Ceylon. The husband promised to pay £300/ month
as maintenance to wife for the time she lived apart. The husband however failed to
pay the amount and was eventually sued by his wife.

In the case it was held that the husband was not liable to pay as there was no intention
to create a legal relationship between the parties.

Rose & Frank Co. Vs. Crompton & Brothers Ltd. –

Rose & Frank entered into an Agency agreement with Crompton & Bros. One clause
in the agreement read:

12 th
Law of Contract by Avatar Singh 5 edition
13
Contract Law by Avatar Singh revised edition 2019

12 | P a g e
 “This agreement is not entered into as a formal or legal agreement and shall not be
subject to legal jurisdiction in the law courts.” R&F in their plaint claimed that there
was a binding legal contract of Agency and hence Crompton is liable.
It was held that there was no intention to create legal relations on the part of the
parties to the agreement and hence there was no contract14.

14
www.scribd.com

13 | P a g e
 BIBLIOGRAPHY

Online sources

http://www.indiankanoon.com
http://www.lawctopus.com
http://www.scribd.com
www.britanicca.com

Books

Contract-1 Law by Dr.R.k. Bangia 7th edition

Law of Contract by Avatar Singh Ed. 13th
Indian Contract Act 1872 (Bare act)
Law of contract I by Dr. S.S. Srivastava 7 th edition 2018

14 | P a g e