Dr.

Kirti Bajaj Law of Contract

VALID CONTRACT (Sec. 10)

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 if it is not as per Sec. 10 of the Act. A signed written contract reduces the
risk and saves the parties from entering into a contract which they cannot later enforce.
Sec. 10- What agreements are contracts.
All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.
Nothing herein contained shall affect any law in force in India and 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repealed by which any contract is required to be made in writing or in the presence of witnesses,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.
Sec. 10 of the act mentions about what agreements are contracts. It states that all the
agreements are contracts if they are made-
• by a free consent of parties (i.e. their free will) who are competent to contract,
• for a lawful consideration and
• 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force in India, and is not hereby expressly repealed, by which any contract is required to be made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.
According to Sec. 2(e ) of the Indian Contract Act, 1872, every promise and every set of
promise, forming the consideration for each other, is an agreement.
Agreement = Offer + Acceptance
According to Sec. 2 (h) of the Act, an agreement enforceable by law is a contract.

Contract = Agreement + Enforceable 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 Sec. 10 of
the Indian Contract Act, 1872 become contracts.

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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
1. 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.
The parties entering into the contract must agree upon the same item in the same sense, or they
cannot enter into the deal. It implies that there must be an agreement in that regard (i.e. meeting of
minds).
2. Legal Relationship
A contract must be intended to create a legal relationship between the parties. It only
becomes a problem when both parties are aware that if one of them breaks his commitment, the
other would be held responsible for the contract’s failure.
There is no contract between the parties if there is no desire to establish a formal
relationship. Because they do not consider or give birth to a legal relationship, agreements of a
social or domestic character are not regarded as contracts.
3. Competency of parties
Sec. 10 of the Act states that the parties must be competent to enter into a contract. Sec.
11 and 12 of the Act states that a person is regarded as competent to enter into a contract if:

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• He has reached the age of majority;

• He is of sound mind; and
• He is not barred from doing so by any laws to which he is subject.
These individuals, however, are deemed incapable of entering into contracts or only
capable of doing so to a limited degree under Sec. 10 of the Act. In the case of Mohori Bibee v.
Dharmodas Ghose, the court ruled that contracts entered into by minors or those lacking capacity,
like the mentally unfit or legally disqualified, are voidable.
4. Free consent
Sec. 10 of the Act provides that there should be free consent of the parties. Two or more
people are considered to consent to a common item under Sec. 13 of the act when they agree to
the same thing in the same meaning.
Consent is seen to be the most essential part of a contract. The free consent discussed in
the next section is necessary for a contract to be enforceable. When none of the following factors—
• coercion,
• undue influence,
• fraud,
• misrepresentation, or
• mistake of fact and law
contribute to consent, it is considered to be free and legitimate.
When one of these factors results in the loss of consent, the party whose consent was lost
may choose to nullify the agreement according to Sec. 10 of the Act. However, if the consent was
given inadvertently, the agreement is regarded as invalid.
5. Lawful consideration and lawful object
Sec. 10 of the Act specifically provides that there must be lawful consideration and a lawful
object. The following considerations and objects are not regarded as legal under Sec. 23 of the
Act:
• If it is prohibited by law,
• If it violates the terms of another law,
• If it is fraudulent,
• If it harms another person’s person or property,
• If it is deemed to be immoral or contrary to public policy by the court.

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Therefore, a contract that contains such illegal clauses is not regarded as being a genuine
contract. If a contract shows any of these elements, then it is unlawful and void u/s 23.
A contract is forbidden by law if it is either against any law, both substantive and
procedural. For example, an agreement to sell liquor without a license, despite the law mandating
to have a license. In a particular case, the Plaintiff owner of a bar and having the license to sell
liquor transferred the management of the bar and liquor sale to the defendant who had no such
license. The court held that transferring business and sale of liquor to a person without the license,
was prohibited by law and thus cannot be enforced.
6. Intention to create legal relationship
Intention to create a legal relationship is one of the most fundamental aspects of the law.
It is defined as the intention to enter a legally binding agreement or contract; it implies that the
parties acknowledge and accept legal consequence in case of a breach of a contract. Intention to
create legal relations consist of readiness of a party to accept the legal consequences of having
entered into an agreement.
Balfour vs. Balfour (1919)
Fact: The Plaintiff and the Defendant were a married couple. The Defendant husband and the
Plaintiff wife lived in Ceylon where the Defendant worked. In 1915, while the Defendant was on
leave, the couple returned to England. When it was time to return to Ceylon, the Plaintiff was
advised not to return because of her health. Prior to the Defendant returning, he promised to send
the Plaintiff £30 per month as support. The parties’ relationship deteriorated and the parties began
living apart. The Plaintiff brings suit to enforce the Defendant’s promise to pay her £30 per
month. The lower court found the parties’ agreement constituted a contract.
Issue: Does the husbands promise to pay £30 per month constitute a valid contract which can be
sued upon?
Held: The court first recognized that certain forms of agreements do not reach the status of a
contract. An agreement between a husband and wife is often times such a form of agreement.
Held: In such agreements, one party is give a certain sum of money on a daily, weekly, monthly,
etc.. basis. This agreement is sometimes termed an allowance. However, these agreements are
not contracts because the “parties did not intend that they should be attended by legal
consequences.”

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7. Certainty
Certainty of meaning, as defined in Sec. 29 which states that the subject matter shall be
certain or capable of being made certain. Example: Mr. A went to a bike showroom and said,
give me a red-coloured Pulsar 200, 150CC engine. The owner of the showroom, Mr. B, accepted
the offer and said that yes, we have a red pulsar 200, 150CC engine for Rs 2,00,000/-. This is an
agreement which has a certain meaning.
8. Possibility of performance
In the list of essentialities, the possibility of performance is an important pillar, which states
that if an agreement is of such nature that it is impossible to perform, then such an agreement is
void ab initio. For example: Mr. A offer to pay Rs 10,00,000/- to Mr. B if he manages to hunt
hidden treasure by magic. This agreement is impossible to perform and, hence, void.
9. 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 Act.
• An agreement in restraint of marriage; or
• An agreement in restraint of trade, profession or;
• Agreement in restrain of proceedings;
• An agreement by way of wager; etc.
10. Legal Formalities
The agreement must comply with the necessary formalities such as writing, registration,
stamping, etc. if required in order to make it enforceable by law. An oral contract is a perfectly
valid contract, but not in those cases where writing registration is required by some statue.
Conclusion
Knowingly or unknowingly, every person in their daily life enters into a contract. Every
single person should be aware of the Essential elements of a contract. This will help to avoid
prudent losses and unprofitable Deals. Facts about the Essential elements of a contract helps
protect the interest of the parties in the contract. This also helps in feeding remedies in case of
breach of contract.