Valid Contract: A contract is a contract only when it satisfies all its validity. A contract will not be qualified to be a legal contract if it does not pass specific factors. India is a country that is much observant of legal factors, it is a country of laws, thus holding a valid and legal contract can only further your chances of getting represented.  There are some essential points that are to be considered before holding a contract. In this context, we will be discussing the essentials of a valid contract. 

Introduction of Valid Contract

We have seen above that the two elements of a contract are: (1) an agreement; (2) legal obligation. Section 10 of the Act provides for some more elements which are essential in order to constitute a valid contract. It reads as follows: “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 hereby expressly declared to be void.” Thus, the essential elements of a valid contract can be summed up as follows:

1. Agreement.
2. Intention to create legal relationship.
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Agreements not declared void or illegal.
8. Certainty of meaning.
9. Possibility of performance.
10. Necessary Legal Formalities.

These essential elements are explained briefly.

Agreement

Okay, imagine you have two friends, ‘A’ and ‘B.’ ‘A’ has two cars, let’s call them ‘x’ and ‘y.’ Now, ‘A’ wants to sell car ‘x’ for Rs. 30,000. The thing is, ‘B,’ who knows ‘A,’ doesn’t realize that ‘A’ has both cars. ‘B’ thinks ‘A’ is only selling car ‘y’ for that price and happily agrees to buy it.

But here’s the catch: there’s no deal here because ‘A’ and ‘B’ aren’t on the same page. ‘A’ wants to sell car ‘x,’ while ‘B’ thinks he’s buying car ‘y.’ No agreement on the same thing at the same time. So, no deal – they’re not seeing eye to eye on the cars.

Intention to Create Legal Relationship

When people decide to make an agreement, it’s important that they actually intend to create a legal relationship. If you’re just making a deal for something casual or within a family setting, like a friendly favor, it might not be considered a full-on contract. So, basically, if you’re just doing something nice for a friend or family member without any legal strings attached, it’s not the same as a proper contract.

Example

A husband agreed to pay £30 to his wife every month while he was abroad. As he failed to pay the promised amount, his wife sued him for the recovery of the amount.

Held: She could not recover as it was a social agreement and the parties did not intend to create any legal relations.

However, even in the case of agreements of purely social or domestic nature, there may be intention of the parties to create legal obligations. In that case, the social agreement is intended to have legal consequences and, therefore, becomes a contract. Whether or not such an agreement is intended to have legal consequences will be determined with reference to the facts of the case. In commercial and business agreements the law will presume that the parties entering into agreement intend those agreements to have legal consequences.

Free and Genuine Consent

The consent of the parties to the agreement must be free and genuine. The consent of the parties should not be obtained by misrepresentation, fraud, undue influence, coercion or mistake. If the consent is obtained by any of these flaws, then the contract is not valid.

Parties Competent to Contract

In order for a contract to be valid, the people involved should be capable of entering into it. According to Section 11, anyone can enter into a contract if they (i) are old enough, (ii) are mentally sound, and (iii) are not restricted by any applicable laws. This means that issues like being too young, having mental health issues, being intoxicated, or having a specific legal status can create problems with the capacity to enter into a contract. If any party has one of these issues, the contract may not be enforceable, unless there are special circumstances.

Lawful Consideration

In any agreement, both parties need to bring something to the table – a give-and-take scenario. It’s like a friendly exchange where each person offers or commits to something and gets something in return. This exchange is called consideration, and it’s basically what one party is asking for in exchange for their promise. Now, this “price” doesn’t always have to be money; it could be anything of value. But here’s the catch: if one party’s promise isn’t backed by consideration, it’s like making a promise without any real commitment, and legally, that doesn’t fly. Oh, and the consideration? It has to be legit and lawful – no shady business allowed.

Lawful Object

The object of the agreement must be lawful and not one which the law disapproves.

Agreements Not Declared Illegal or Void

Sometimes, even if an agreement seems totally legit with all the right ingredients, the law can slam the brakes on it. There are specific agreements that the law flat-out says are a no-go, even if everything looks good on paper. In those cases, no matter how solid the agreement might seem, it won’t hold up in court.

Certainty of Meaning

In simple terms, for an agreement to be legally binding, it needs to have a clear and definite meaning. Let’s take an example: if A agrees to sell 10 meters of cloth without specifying what type of cloth, there’s a problem. We don’t know if it’s cotton, silk, or something else. This lack of clarity makes the agreement unenforceable. On the flip side, if the agreement says something like “10 meters of Terrycot (80:20),” it becomes enforceable because there’s no confusion about what is meant.

But here’s the catch: if people agree to make an agreement in the future without settling on the details, that doesn’t count as a done deal. In legal terms, an “agreement to agree” isn’t enough to create a binding contract. It needs to be clear and specific from the start.

Possibility of Performance

The terms of the agreement should be capable of performance. An agreement to do an act impossible in itself cannot be enforced. For instance, A agrees with B to discover treasure by magic. The agreement cannot be enforced.

Necessary Legal Formalities

Contracts can be either spoken or written. But here’s the catch: if the law says a certain type of contract must be in writing, it has to follow some rules like being properly written, registered, and maybe even witnessed. If you skip these steps, the contract won’t hold up in court – it’s like forgetting to dot the i’s and cross the t’s. So, it’s crucial to do the paperwork right to make sure your agreement is legally solid and enforceable.

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