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In our day to day lives we enter into different agreements like selling and
buying of property, becoming an employee, settling disputes and much
more. It is seen that often individuals enter into agreements without even
considering the essential provisions of a valid contract, and therefore end up
entering into an invalid contract and thereby suffering from loss. A contract
is difficult to be enforced unless it’s terms can be admitted by the parties. A
signed written contract reduces the risk and saves the parties from entering
into a contract which they cannot later enforce. This article is meant to
highlight the nuts and bolts of an enforceable contract.

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What is a contract?

Under the Indian Contract Act 1872, the term contract is defined under Section 2(H),
which states that an agreement that is enforceable by the law is known as a Contract.
In contract, there must be an intent to create legal relationships not social, moral, or
religious.

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Enforceable Contract
An enforceable contract is a contract that needs an offer and an
acceptance.
When negotiating in a business agreement, one of the main
considerations is whether the contract will be deemed as an
enforceable under law. Constructed as legally binding instruments, a
contract is a mutually assented to promise between two parties in a
bargained for exchange. The steps to contract formation are: an offer;
an acceptance; consideration; and enforceability.

Enforceable and Unenforceable

Contract
An enforceable contract is a written or oral agreement that can be
imposed in a court of law. If the law permits enforcement of a contract,
execution of an agreement is the obligation of the assenting parties.
Terms may not be violated or breached without causing the contract to
void. Voidable or voided contracts are those that are null in effect due
to one or both parties violating agreement with failure to perform or
adhere to terms and conditions as promised. A credible defense must
be found to cite void, giving the victim party the right to annul or
rescind the agreement. In some cases, a court will determine unjust
terms in the bargaining process, or in found to be in the confines of the
agreement itself. Severability of a contract is a void as if it had never
existed.

Essentials of a Valid Contract:

1. Agreement
2. Enforceable by law

What is an Agreement, well agreement is nothing but a set of promises, which form the
consideration for each other. It is defined under Section 2(e) of the Indian Contract Act 1872.
To simplify it,

Agreement = valid Offer/proposal + valid acceptance + lawful consideration

Section 2(a) defines offer, Section 2(b) defines acceptance, Section 2(d) defines
Consideration

Now, what does the term enforceable signifies here, it means if there is any breach of
contract by any one party, then the aggrieved party can approach Court and can get it
legally enforced or we can say that court issues the direction to the party who breached the
contract to perform it or compensate the suffering party in form of damages.

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Section 10 of the act mentions about what agreements are contracts. It
states that all the agreements are contracts if they are made

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by a free consent of parties (i.e. their free

will) who are competent to contract,

Definition of Free Consent

In the Indian Contract Act, the definition of consent is given in Section 14,
which states that “it is when two or more persons agree upon the same
thing and in the same sense”.
 Example
‘A’ agrees to sell his house to ‘B’. ‘A’ owns three houses and wants to sell
his house in Haridwar. ‘B’ thinks he is buying his Delhi house. Here ‘A’ and
‘B’ have not agreed upon the same thing in the same sense. Therefore,
there is no consent and no contract afterwards.

In the case of Raffles v. Wichelhaus, two parties, ‘A’ and ‘B’, entered into
a contract for the sale of 125 cotton bales by a ship named “peerless”
from Bombay. There were two ships with the same name, and while Party
‘A’ was thinking of one ship, Party ‘B’ was thinking of the other ship. The
court held that there was no meeting of minds by both parties. Hence the
contract was invalid.

Elements:- The elements of consent are limited to a similar purpose as

well as the same sense of mind. On the other hand, the elements of free
consent should be free from fraud, coercion, undue influence,
misrepresentations, and other mistakes too.

Void: The contract will be voidable if there is no consent. In contrast, the

voidability of the contract will be decided by the aggrieved party in the
absence of free consent.

By the parties who are competent to contract

Every person is competent to contract who has the legal capacity to do
so which includes the age of majority according to the law, soundness of
mind and is not disqualified from contracting by any law to which he is
subject.

This ensures that the contract is not voidable or unenforceable due to

the incapacity of one or more parties involved.

Who are competent to Contract?

According to Sections 11 and 12 Indian Contract Act, the following persons are
competent to contract:

1. Every person who has attained the age of majority: According to Section 11, any
person who has attained the age of 18 years is competent to contract.
2. Persons who are of sound mind: According to Section 12, a person who is of sound
mind is competent to contract. A person who is of unsound mind at the time of
making the contract is not competent to contract.
 3. Persons who are not disqualified by law: According to Section 11, any person who
is not disqualified by law is competent to contract.

 by a free consent of parties (i.e. their free will) who are competent
to contract,
 By the parties who are competent to contract
 for a lawful object, and
 are not expressly declared to be void.

The section also mentions that nothing which is contained shall effect any
law which is in force in India, and is not hereby expressly repealed, by which
any contract is required to be made in writing or in the presence of
witnesses, or any law relating to the registration of documents.

As per Section 2(e) of the Contract Act, every promise or a set of promises
which forms the consideration for each other is an agreement. Thus a
promise can be said to be an agreement.
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 agreement= offer+acceptance
Section 2(h) of the act defines contract as an agreement which is
enforceable by law. A contract can also be said to be an agreement, the
object of which is to create a legal obligation i.e. a duty enforceable by law.

 contract= agreement+enforceability by law

Agreement is a wider term than contract wherein all contracts are
agreements but all agreements are not contracts. The agreements which
satisfy the conditions mentioned in Section 10 of the Indian Contract Act,
1872 become contracts.

Agreements are classified into two categories:

Agreements not enforceable by law– the agreements which do not

satisfy the essentials of a valid contract are not enforced by law, hence
cannot be considered as contracts. According to section 2(g) of the act such
agreements are said to be void. For instance, an agreement entered into by
a minor is held to be void. Section 24-30 of the act mentions about the
agreements that are considered void.

 Section 24- agreements are considered as void if considerations and

objects are unlawful.
  Section 25- agreement without consideration is held as void unless
the agreement is in writing and registered or is a promise to
compensate for something done or is a promise to pay debt which
is barred by limitation law.

 Section 26- agreement which is made in restraint of marriage is

held as void.

 Section 27- agreements which are in restraint of trade are held as

void.

 Section 28- agreement which is in restraint of legal proceedings is

void.

 Section 29- uncertain agreements are held as void.

 Section 30- agreement by way of wager is held as void.
Agreements enforceable by law– the agreements that satisfy the
essentials of a valid contracts are enforceable by law.

Thus, Sections 2(h) and 10 of the Act state about the essential elements of
a valid contract. If any one of those elements is not satisfied or is present in
an agreement, it will affect the validity and will not form a valid contract.

If we enter into a contract containing prescribed terms and conditions, which

is a must under the statute then that contract becomes a statutory contract.
If a contract incorporates certain terms and conditions in it, which are
statutory then, the said contract to that extent is statutory.

Essential elements of a valid contract

1. Offer and acceptance
2. Consensus ad idem
3. Legal relationship
4. Competency of parties
5. Free consent
6. Lawful Consideration
7. Lawful Object
8. Not declared to be void
9. Certainty and Possibility of Performance
10. Legal Formalities

Offer and acceptance

A contract can be evolved in the presence at least two parties one of them
making the offer and the other accepting it. Therefore there must be an offer
by one party and its acceptance by the other party. The offer when is
accepted becomes an agreement. The party which makes the offer is known
as offeror and the party to whom the offer is made is known as offeree.

Consensus ad idem
The parties that are entering in the contract must have mutual consent i.e.
they should be agreeing upon the same thing in the same sense as it is. It
means that there must exist consensus ad idem (i.e. meeting of minds).

Legal relationship
Parties entering into a contract must intend to constitute a legal relationship.
It arises only when the parties know that if any one of them fails to fulfil his
part of the promise, he would be liable for the failure of the contract.

If there exists no intention to create a legal relationship, there is no contract

between parties. Agreements of a social or domestic nature are not
considered as contracts as they do not contemplate or give rise to a legal
relationship.

Competency of parties
According to section 11 of the contract act The parties entering into a
contract would be considered competent if he

1. Has attained the age of majority,

2. Is of sound mind,
3. Is not disqualified to make a contract under a law to which he is
subject.
However, the following persons are considered incompetent to contract, or
only capable of contracting to a particular extent. The persons who
disqualified from entering into a contract due to certain reasons may arise
from their legal status, political status or corporate status.

1. Alien Enemy: An agreement with an Alien Enemy is held to be void.

2. Foreign Sovereign and Ambassadors: Foreign sovereigns and their
representatives enjoy certain amount of privileges and immunities in
 every country. They cannot enter into a contract except through
their agents residing in India.
3. Convicts: A convict while he is undergoing imprisonment, cannot
enter into a contract.
4. Insolvents: An insolvent person is a person who is said to be unable
to discharge or get off his liabilities and therefore, has applied for
being adjudged insolvent or if such proceedings have been initiated
by any one of his creditors.
5. Company or Statutory bodies: A contract entered into by a
corporate body or statutory body will be valid only to the extent it is
within its Memorandum of Association
In the case of Mohori bibee v. Dharmodas Ghose, wherein Dharmodas
Ghose being a minor mortgaged his property in favour of the defendant
Brahmo Dutt, who was a money lender to secure a loan. At the time of
transaction the money lender, had the knowledge that the plaintiff was a
minor. The court held that the defendant’s contentions were rejected. Minor’s
agreement was held void, and it was held that the minor’s agreement was
held void, and it was held that the minor could not be asked to repay the
loan taken by him.

Free consent
According to section 13 of the act two or more persons are said to consent
to a common thing when they agree upon the same thing in the same sense.
A consent is regarded as the most fundamental component of a contract. The
next section talks about free consent which is essential for a valid contract. A
consent is said to be free and valid when it is not caused by:

1. Coercion
2. Undue influence
3. Fraud
4. Misrepresentation
5. Mistake
When consent is caused due to any of such factor, the agreement is voidable
at the option of the party whose consent was so caused. if however the
consent is done by mistake, the agreement is considered to be void.

A consent of a person is affected by a number of factors, of which coercion is

the most noticeable one.

Coercion is defined under Section 15 of the act as committing, or

threatening to commit, any act forbidden by the Indian Penal Code (45 of
1860) or the unlawful detaining, or threatening to detain, any property, to
the prejudice of any person whatever, with the intention of causing any
person to enter into an agreement. —Coercion means the committing, or
threatening to commit, any act which is forbidden by the Indian Penal Code
(45 of 1860) or the unlawful detaining, or threatening to detain, any property
with the intention of causing any person to enter into an agreement.”

In the case of Ranganayakamma v. Alwar Setti the issue involved was

that a widow was not allowed to proceed with the cremation of her husband’s
dead body until she adopted the boy. The court held the adoption as invalid
because her consent for adopting was obtained by coercion.

Threat to commit suicide

The act of commiting suicide is prohibited under IPC, and therefore a threat
to commit suicide leads to coercion. The Madras High Court, in the case
of Ammiraju v. Seshamma, where Amiraju threatened to commit suicide to
his wife and son if they did not release some properties in favour of his
brother. His wife and son executed the deed but later took the plea of
coercion in the court. The judges took the view that as threat to commit
suicide is an offence punishable under Indian Penal Code, it commits to
coercion.

Effect of coercion in a contract

In cases where a contract is exercised under force by one party, the party
which receives any benefit due to it, must restore it back. If the aggrieved
party suffers from any loss, he can recover it from the other party of the
contract.

Section 16 of the act mentions about undue influence wherein a contract is

said to be induced by ‘undue influence’ where the relations subsisting
between the parties are such that one of the party stands in a by which he
can dominate the will of the other party and uses that position to obtain an
unfair advantage over the other.

Presumption of undue influence in Unconscionable Bargains

In the cases of unconscionable bargain in between the parties on an unequal
footing, the law raises a presumption of undue influence. When a person is
found to be in a position by which he can dominate the will of the other, or
the transaction appears to be affected due to dominance, the burden of proof
that no undue influence was exercised in the transaction lies on the party
who is in a position to dominate the will of the other.
In such cases, it is for the dominant party to rebut the presumption of undue
influence exercised by the law. If a party has got any gain at the cost of the
other party, he is required to prove that this advantage had not been gained
by undue influence.

In the case of Diala Ram v. Sarga(1927) the defendant was already

indebted to the plaintiff, who was a village money lender. He again took a
fresh loan from the plaintiff and then executed a bond, wherein he agreed to
pay some interest. The court held that the contract was unconscionable and,
therefore, the burden of proof was on the plaintiff to show that there was no
undue influence in this case.

Contracts with Pardanashin Woman

A pardanashin woman is one who observes complete seclusion i.e., who does
not come in contact with people other than her family members. Law
provides a special protection to pardanashin woman on the ground of their
being ignorant so far as the worldly knowledge goes. A contract done with a
pardanashin woman is usually presumed to have been induced by undue
influence. The burden of proving that no undue influence was used lies on
the other party. The other party will have to prove that

(i) the terms of the contract were fully explained to her,

(ii) she understood the implications,

(iii) free independent advice was available to her, and

(iv) she freely consented to the contract. This protection is available only to a
woman who observes complete parda. Some degree of parda or seclusion is
not sufficient to entitle her to get special protection.

Section 17 mentions fraud as any act which is done by a party to a contract

with the intention of deceiving another party or to induce him to enter into a
contract. It is considered as a deception in order to gain by another’s loss.

Misrepresentation under section 18 includes:-

(1) The positive assertion, in a manner not warranted by the information of

the person making it, of that which is not true, though he believes it to be
true

(2) Any breach of duty which, without an intent to deceive, gains an

advantage to the person committing it, or anyone claiming under him; by
misleading another to his prejudice, or to the prejudice of any one claiming
under him;

(3) Causing, however innocently, a party to an agreement, to make a

mistake as to the substance of the thing which is subject of the agreement.

Consent of partners in a partnership firm

The formation of a partnership requires few basic formalities, such as a
written agreement or registration with an agency. All parties that are
considered partners must consent to be such. The consent given by a partner
may be express, such as signing a written partnership agreement or it can be
implied by the conduct of the parties. Parties do not specifically need to
agree to form a ‘partnership’, rather their agreement or conduct must be in
such a way that they agree to run a business for profit. Even if the parties
agree that their business will not be labeled a partnership, the business may
be found to be one if it meets the condition of a partnership firm.

Consent of parties in an antenuptial agreement

An antenuptial agreement, also called a prenuptial contract is a contract
entered into by the parties prior to marriage, civil union, or by the people
intending to marry or contract with each other. The content of a prenuptial
agreement varies widely, but commonly it includes provisions for division of
property and spousal support in the event of divorce or dissolution of
marriage.It may also include terms relating to the forfeiture of assets as a
result of divorce on the grounds of adultery. In India, prenuptial agreements
are neither legal nor valid under the marriage laws because they do not
consider marriage as a contract but in Goa it is legally enforceable
under Portuguese Civil Code, 1867. A marriage in India is treated as a
religious bond between both the husband and the wife and prenuptial
agreements finds no social acceptance in the country. However, these
agreements are governed by the Indian Contract Act and have as much
sanctity as any other contract, either oral or written.

In cases involving the enforcement of a prenuptial contract at divorce,

usually it is found that a husband presents a written prenuptial contract
before his wife-to-be for the first time a few days before the wedding or
sometimes even on the day of the wedding and gives her an ultimatum to
sign the contract or else he won’t marry her. At the time of divorce, the
wife’s attorney portrays the husband’s ultimatum as coercion. But if seen
technically, it is not coercion as the husband is not legally bound to marry
and the husband did not create the wife’s need to marry to him. The
ultimatum can simply be considered as a condition precedent to the
marriage.
Lawful consideration and lawful object
According to section 23 of the Indian Contract Act, the following
considerations and objects are not considered as lawful:

1. If it is forbidden by law,
2. If it is against the provisions of other law,
3. If it is fraudulent,
4. If it damages somebody’s person or property,
5. If it is in the opinion of court, immoral or against public policy.
Thus any contract which incorporates such unlawful provisions are not
considered as a valid contract.

Certainty and possibility of performance

The terms of the contract should be certain and not vague. If by any way it is
not possible to ascertain the meaning of the agreement, it cannot be
enforceable by law. An agreements to do any impossible act can never be
enforced. For example, agreement to bring stars from the sky cannot be
considered as a valid contract as it is an impossible act.

Enforceability of oral agreements

If an oral agreement contains the condition of a valid agreement, it will be
considered as a contract. In the case of Sheela Gehlot v. Sonu Kochar
& Ors Delhi High Court observed that oral agreements are valid and
enforceable and there could be no dispute about it, unless there is anything
which needs to be written. Further as in a contract, there has to be some
proposal and acceptance necessarily. The validity of an oral agreement
cannot be questioned. A written agreement is considered important because
an oral agreement cannot be produced as an evidence before the court. The
burden of proving the oral agreement lies upon the party who claims to
consider such agreement in existence.

In the famous case of Food Corporation of India v. Vikas Majdoor

Kamdar Sahkari Mandli ltd, the Apex court said that if an oral agreement
is pleaded before the court but is not proved, the person will be entitled to
compensation under Section 70 of the act as Principle of quantum meruit.
This principle means when the work is done beyond the contract and the
benefit of the work has been availed of by the defendant.