Essentials of a Valid Contract under the Indian Contract Act, 1872
INTRODUCTION
Contracts form the foundation of commercial and civil transactions in modern society. The Indian Contract Act, 1872 (ICA) governs the law relating to contracts in India. Under Section 2(h) of the Indian Contract Act, 1872, “an agreement enforceable by law is a contract.” In simple terms, every contract is an agreement, but not every agreement is a contract. To become legally enforceable, an agreement must fulfill the essential elements provided under the Act.
Section 10 of the Indian Contract Act, 1872 sets out the essentials of a valid contract. It states that all agreements are contracts if they are made by free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void. These statutory requirements form the basis for the essentials explained below.
Essentials of a Valid Contract
OFFER AND ACCEPTANCE (Sections 2(a)–2(b))
A valid contract begins with a lawful offer by one party and lawful acceptance by another. The offer must be clear, definite, and communicated properly. Acceptance must be absolute and unconditional.
Case Law: Carlill v. Carbolic Smoke Ball Co. (1893) 1 QB 256 — an offer to the world was held binding once accepted by performance.
INTENTION TO CREATE LEGAL RELATIONSHIP
Both parties must intend that their agreement should have legal consequences. Agreements of a purely social or domestic nature (for instance, between family members) are generally not enforceable.
Case law: Balfour v. Balfour (1919) 2 KB 571 — a husband’s promise to pay maintenance to his wife was held not legally binding.
LAWFUL CONSIDERATION (Section 2(d))
Consideration means something in return; it may be an act, abstinence, or promise, and must be lawful. Without consideration, a contract is void, except as provided under Section 25 (e.g., agreements out of natural love and affection or for compensation for past voluntary services).
Case law: Chinnayya v. Ramayya (1882) ILR 4 Mad 137 — consideration can move from a third party.
CAPACITY TO CONTRACT (Section 11)
The parties must be competent to contract: that is, of the age of majority (18 years or above), of sound mind, and not disqualified by law.
Case law: Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 (PC) — a minor’s contract is void ab initio.
FREE CONSENT (Sections 13 & 14)
Consent must be free: not caused by coercion, undue influence, fraud, misrepresentation, or mistake. If consent is not free, the contract is voidable at the option of the aggrieved party.
Case law: Ranganayakamma v. Alwar Setti (1889) ILR 13 Mad 214 — a contract obtained under coercion was held voidable.
LAWFUL OBJECT (Section 23)
The object of the agreement must be lawful. It must not be forbidden by law, defeat provisions of law, be fraudulent, injurious to person or property, immoral, or opposed to public policy.
Case law: Gherulal Parakh v. Mahadeodas Maiya AIR 1959 SC 781 — agreements opposed to public policy are void.
CERTAINTY AND POSSIBILITY OF PERFORMANCE (Sections 29 & 56)
The terms of the contract must be certain and capable of being performed. Agreements that are vague or impossible to perform are void.
Case law: Satyabrata Ghose v. Mugneeram Bangur & Co. AIR 1954 SC 44 — impossibility under Section 56 includes practical impossibility.
LEGAL FORMALITIES
Certain contracts, such as those involving immovable property, gifts, or guarantees, must comply with specified formalities (e.g., must be in writing, registered, or attested) as per applicable law. Non-compliance may make them unenforceable.
CONCLUSION
The Indian Contract Act, 1872 ensures contracts are made fairly, with free will and lawful intent. The essentials discussed above separate a valid contract from a mere agreement. For law students and practitioners, a thorough understanding of these fundamentals is crucial for interpreting and enforcing contractual rights.
CITATIONS :
Statutory citation
The Indian Contract Act, 1872, Sections 2(a)–(h), 2(d), 10, 11, 13–14, 23, 25, 29, and 56.
Case law citations
Carlill v. Carbolic Smoke Ball Co. (1893) 1 QB 256.
Balfour v. Balfour (1919) 2 KB 571.
Chinnayya v. Ramayya (1882) ILR 4 Mad 137.
Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal 539 (PC).
Ranganayakamma v. Alwar Setti (1889) ILR 13 Mad 214.
Gherulal Parakh v. Mahadeodas Maiya AIR 1959 SC 781.
Satyabrata Ghose v. Mugneeram Bangur & Co. AIR 1954 SC 44.
REFERENCE :
Indian Contract Act,1872.
Avtar Singh, Law of Contract and Specific Relief, 13th Ed., Eastern Book Company, 2022.
- Bangia, Indian Contract Act, 16th Ed., Allahabad Law Agency, 2023.