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Essentials of A Valid Contract

The document discusses the topic of definitions of contract and essentials of a valid contract according to Business Law. It defines a contract as an agreement that is legally enforceable and outlines the key elements that must be present for a contract to be considered valid, including offer and acceptance, lawful consideration, capacity of parties, free consent, lawful object, and certainty of terms. The document examines each of these essential elements in further detail.

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Yaseen Saleem
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149 views17 pages

Essentials of A Valid Contract

The document discusses the topic of definitions of contract and essentials of a valid contract according to Business Law. It defines a contract as an agreement that is legally enforceable and outlines the key elements that must be present for a contract to be considered valid, including offer and acceptance, lawful consideration, capacity of parties, free consent, lawful object, and certainty of terms. The document examines each of these essential elements in further detail.

Uploaded by

Yaseen Saleem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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BUSINESS LAW (MGT-310)

3 Credit Hours, Spring 2016


Instructor: Aqsa Ijaz
[email protected]
BBA

Topic#1
Definitions of Contract
&
Essentials of a Valid Contract
Business Law
Business law is a rule which helps us to regulate and
manage our business transactions and activities system.
It has direct relation with trade, industry and
commerce. e.g. insurance act, contract act, tax act, sale
of goods act, agency act etc.
What is a Contract?
An agreement which is legally enforceable alone is a contract.
Agreements which are not legally enforceable are not contracts but
remain as void agreements which are not enforceable at all or as
voidable agreements which are enforceable by only one of the parties
to the agreement.

“All contracts are agreements, But all agreements are not contracts.”
OFFER/PROPOSAL ACCEPTANCE PROMISE
PROMISE

AGREEMENT

CONSIDERATION
AGREEMENT ENFORCEABLE BY LAW CONTRACT
Definition of Contract
 Every Agreement and promise enforceable by law is a
contract.
(Sir Fredreck Pollock)

 A contract is an agreement creating and defining obligations


between the parties.
(John Salmond)

 An agreement enforceable by law is a contract.


(Sec.2(h), Contract Act, 1872)
Essentials of Valid Contract
As per Sec. 10 of Contract Act, 1872
“All agreements are contracts, if they are made by free consent
of the parties, competent to contract, for a lawful consideration
and with a lawful object, and not hereby expressly declared to
be void .”
Essentials of Valid Contract
 Offer and Acceptance:
According to Sec. 2(a) & 2(b), In order to create a valid contract,
there must be an agreement between two parties. An
agreement involves a valid offer by one party and valid
acceptance of the same by the other party.

 Legal relationship:
The parties must intend their agreement to result in legal
relations. This means that the parties must intend that if one of
them falls to perform his promise, he shall be answerable for
that failure in law. Duties and rights should be legal and not
merely moral. [an agreement of a purely domestic or social
nature is not a contract ].
Essentials of Valid Contract
 Lawful consideration:
All contracts must be supported by consideration. Consideration
means “something in return”. It can be cash, kind, an act or
abstinence. It can be past, present or future. However,
consideration should be real and lawful. A consideration must
not be unlawful, immoral or opposed to the public policy.
According to Sec.23, the consideration is lawful if it is:
 Not forbidden by law
 Not fradulent
 Not involve injury to the person or property of another
 Not immoral
 Not opposed to public policy
Essentials of Valid Contract
 Capacity of Parties:
The parties to a contract must have capacity (legal ability) to
make valid contract. Sec.11 of the Contract Act, 1872 specify
that every person is competent to contract provided.
 Is of the age of majority according to the Law which he is
subject
 Who is of sound mind and
 Is not disqualified from contracting by any law to which he is
subject.
Essentials of Valid Contract

 Free consent:
Two or more parties are said to be of free consent when they
agree upon the same thing in the same sense. An agreement
must have been made by free consent of the parties. consent is
said to be free when it is not caused by coercion, undue
influence, fraud, misrepresentation or mistake.
Essentials of Valid Contract
 Lawful object:
The object of agreement should be lawful and legal.
Consideration or object of an agreement is unlawful if it
 is forbidden by law; or
 is of such nature that, if permitted, would defeat the
provisions of any law; or
 is fraudulent; or
 Involves or implies, injury to person or property of another; or
 Court regards it as immoral, or opposed to public policy.
Essentials of Valid Contract
 Legal Formalities:
Contract may be oral or in writing but in practice it is always in
the interest of the parties that the contract should be made in
writing. Legal formalities regarding the following must be
fulfilled:
 Writing
 Witness
 Attestation
 Registration
Essentials of Valid Contract
 Consensus-ad-idem:
The minds of both the parties must be ad-idem. In other words,
the two parties must have agreed about the subject matter of
the contract at the same time and in the same sense.

 Certainty of Terms & Conditions:


The terms and conditions of the contract should be certain for
both the parties for the performance of the same. An
agreement, the meaning of which is not certain or capable of
being certain are void.
Essentials of Valid Contract

 Possibility of Performance:
If in a contract the act is legally or physically impossible to be
performed the agreement can’t be enforced by law.

 Not expressly Declared to be Void:


For a valid contract it is also important to note that an
agreement must not be one of those which have been expressly
declared to be void by law.

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