1. Offer(i.e. Proposal) [section 2(a)]:-When person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of the other person to such act or abstinence, he is said to make a proposal.
2. Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted.
3. Promise 2(b) :- A Proposal when accepted becomes a promise. In simple words, when an offer is accepted it becomes promise.
4. Promisor and promisee 2(c) :- When the proposal is accepted, the person making the proposal is called as promisor and the person accepting the proposal is called as promisee.
5. Consideration 2(d):- When at the desire of the promisor, the promisee or any other person has done or abstained from doing something or does or abstains from doing something or promises to do or abstain from doing something, such act or abstinence or promise is called a consideration for the promise. Price paid by one party for the promise of the other Technical word meaning QUID-PRO-QUO i.e. something in return.
6. Agreement 2(e) :- Every promise and set of promises forming the consideration for each other. In short,
7. Contract 2(h) :- An agreement enforceable by Law is a contract.
Therefore, there must be an agreement and it should be enforceable by law.
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8. Void agreement 2(g):- An agreement not enforceable by law is void.
9. Voidable contract 2(i):- An agreement is a voidable contract if it is enforceable by Law at the option of one or more of the parties there to (i.e. the aggrieved party), and it is not enforceable by Law at the option of the other or others.
10. Void contract :- A contract which ceases to be enforceable by Law becomes void when it ceases to be enforceable.
Essential Elements of a Valid Contract
According to Section 10, "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."
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 by the latter. Section 7 and Section 8 of the Indian Contract Act, 1872 lay down the rules that define valid acceptance.
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. A promise from the Promisee to Promisor can also be consideration. It can be in the present or in the future. Consideration should be real and lawful in its entirety and of non-fictional. Section 23, 24 and 25 of the Indian Contract Act, 1872 lay down the rules that define lawful and valid consideration.
3. Capacity of parties to Contract In order to convert agreement into a contract, the parties to the contract must be competent to Contract. 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 majority in accordance to the law to which he is subject (Section 11)
- The person is of sound mind. (Section 11, 12)
- The person is not disqualified from contracting by any law to which he is subject.
For e.g. A man domiciled in Gujarat, India may not enter into a Contract of having Alcohol delivered to his residence in Gujarat, but an Army man with domicile in another Indian State residing in Gujarat may legally enter into Contract to Alcohol delivered to him at his residence in Gujarat, albeit with implied restrictions that he'd have to consume all that alcohol himself and cannot resale such alcohol to any local citizens.
4. Consent Two or more persons are said to consent when they agree upon the same thing in the same sense.
5. Free Consent To constitute a valid contract, there must be free and genuine consent from the parties to the contract. It should not be obtained by:
- misrepresentation,
- fraud,
- coercion,
- undue influence or
- mistake.
Sections 13, 14, 15, 16, 17, 18, 19, 19A, 20, 21 and Section 22 of the Indian Contract Act, 1872 lay down the rules that define Free Consent.
6. Lawful Object and Agreement The object of the agreement must not be illegal or unlawful.
Object of the Contract means Objective. Object cannot be of murdering someone or inflicting him with bodily harm.
7. 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.
8. Intention To Create Legal Relationships For two parties to enter into a contract, Both the proposal and its acceptance have to be such that it clearly establishes intent of the party to enter into Contract.
If there is no such intention on the part of the parties. There is no contract between them. Agreements of a social or domestic nature do not contemplate legal relationship;as such they are not contracts.
In Weeks vs Tybalds Case, it was held that the intention to enter into Contract was absent.
9. Certainty, Possibility Of Performance
10. Legal Formalities
11. By surety
