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Essential Elements of a Valid Contract

An agreement must have the following essential elements to become a valid contract:

Offer and acceptance

The first step in creating a contract is an offer by one party and its acceptance by another. The offer when accepted becomes an agreement. Such offer and acceptance must be valid. As the definition of contract states that an agreement is the primary criteria for making a contract. Practically speaking the journey of contract begins with an agreement and the formation of an agreement finds its root in offer and acceptance.

Mutual consent of parties

To constitute a valid contract there must be consensus ad idem (meeting of minds).The parties to an agreement must agree upon the same thing and in the same sense and at the same time.



Amar, who owns two cars, Maruthi 800 and Maruthi Zen, is selling Maruthi 800 to Akbar. Akbar thinks he is purchasing Maruthi Zen. There is no consensus ad idem and consequently, no contract.


Intention to create legal obligation

The agreement must create a legal obligation, besides offer and acceptance; both the parties must have an intention to go to the court of law, if the other party does not meet his promise. Normally, in social agreements there is no intention to go to the court of law but in commercial agreements it is presumed that there is an intention to go to the court. 
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There are certain instances wherein the intention of creating legal obligation is ruled out by the parties by inserting a clause to the same:
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Free consent of parties

If the consent of parties is not free, then no valid contract comes into existence. The consent is not free when it is obtained by coercion, undue influence, and fraud, misrepresentation of facts and mutual mistake of facts.



Suresh threatens to kill Virat, if he does not sell his bat to him. Virat agrees to sell his bat to Suresh. In this case Virat’s consent was obtained by coercion (physical force) and therefore, it cannot be regarded as free. In such cases where the consent of the parties is not free, the contract is voidable at the option of the party not at fault.


Parties must be competent to contract

Sec. 11 of Indian Contract Act specifies that every person is competent to contract provided:
  1. He is a major
  2. He is of sound mind
  3. He is not disqualified by law to enter into a contract

Parthiv, a minor borrowed a sum of ₹ 10,000 from Sachin, a major. Held, Sachin could not recover the sum lent since it was not a valid contract as Parthiv was not competent to contract.


Lawful object

The object of an agreement must be lawful. It must not be fraudulent, unlawful, immoral or opposed to public policy. If an agreement suffers any legal flaw, it shall not be enforceable by law.



Amar offers to pay ₹ 1,000 to Akbar if Akbar kidnaps Anthony. The agreement is unlawful as the object is unlawful.


Lawful consideration

The agreement must be supported by consideration. Consideration means something in return i.e. both the parties must get something in return for the promise. If the promise is not supported by consideration, it will be a bare promise, and hence not enforceable by law. Consideration must be lawful, real and not illusory.



Amar sells his house to Akbar for ₹ 50,000. Akbar’s promise to pay the sum is consideration for Amar’s promise to sell his house and vice versa.


Not expressly declared void

There are certain agreements which have been declared to be void by the law of a country, and then such agreement, if entered into, shall not be enforceable by the court even if the agreement possesses all other essential elements of valid contract. There are agreements which have expressly been declared void as these agreements are not in public interest such as agreement in restraint of trade, marriage, legal proceedings etc.



Amar promises to pay ₹ 50,000 to Akbar if Akbar does not marry at all. This agreement is void as marriage is right of every individual. Restrain of marriage is expressly declared void by the law.


Possibility of performance

The agreement must be capable of being performed. If the parties have agreed on a contract that contains any promise, not possible to be performed in real life, then the agreement will not be considered as valid. The impossibility makes an agreement void if the parties are aware of the same or not.



A promises to put life in B’s dead wife if B pays him a sum of ₹ 1,00,000. Such agreements are not enforceable in the court of law as the performance of such act is impossible in nature.


Meaning of the agreement must be certain

The meaning of an agreement must be certain or should be capable of being made certain. If the terms of the agreement are vague, confusing or uncertain, it shall lead to no binding obligation for the parties.



Amar agrees to sell 5 tons of coconut oil to Akbar at whatever price Akbar may pay. The agreement is void due to uncertainty of price.


Legal formalities

A contract may be made by word, spoken or written, but if there is a statutory requirement that the contract should be in writing, registered or attested, and then such agreement must be so, otherwise it shall not be enforceable.



An oral agreement for sale of immovable property is unenforceable because the law requires such agreements to be in writing and registered.

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