THE LEGAL WATCH
Trusted Contract Advisory
TLW - Contract Awareness Initiative
TLW - Legal Awareness Initiative
The essentials of a valid contract are -
1. Offer - -An offer is an expression of willingness to contract on certain terms in exchange of money made with the intention and will be binding upon acceptance to whom it is addressed. The person who makes offer is called offeror and the person to whom offer is made is called offeree. The offer must be complete, specific and capable of being accepted.
2. Acceptance -Acceptance is another essential element for a valid contract. Acceptance comes into place after the offer is presented, where the offeree can decide whether to accept the offer or not.
Acceptance can be made either verbally or in writing (including mail or email). An acceptance can be in different forms including:
- Conditional Acceptance
- Acceptance by Action
- Option Agreement
3. Consent -When a contract is made ,consent should be there and it should be given by free will without any compulsion i.e. free consent. Free consent means that the party accepting offer and entering into contract with another must have done without any force or pressure from anyone whether physical or mental, agrees with terms of the offer and wishes to establish contractual relationship with the other party.
Definitions - According to Section 10 of the contract act, a contract is valid if it was entered into by free consent of the parties.
Section 14 of the contract act defines free consent as consent not given under coercion, undue influence, fraud, misrepresentation and mistake.
4 .Consideration-Consideration is an essential element of contract. An agreement without consideration is void. Consideration must be real. It might be service or a money. E.g. Ram promises to pay Rs.4 lakhs to Riya to buy the car. This value is called consideration. Consideration should have some value in the eye of law. It may consist of some right, interest, profit or benefit to the one party or loss suffered, responsibility given by the other.
5 .Capacity -– It is another essential element of contract. The people should be aware of terms and conditions of contract they are entering in before they sign the contract. Capacity of person means those who are parties competent to enter into a contract . Any person who wants to enter in contract should not be a minor.
6. Legality -It plays vital role in contract. A contract for an illegal action or product cannot be enforced. All contracts are subject to the laws of the jurisdiction and are applicable to federal, state, and local laws and ordinances. A contract with criminal activity is invalid. The law must follow the jurisdiction.
If the contract is signed due to Undue Influence, Duress, Misrepresentation, threats, false statements, or improper persuasion then it is not legally valid.
If a contract violates public policy then it is void.
7. Meeting of minds -This phrase means that parties entering into contract are intended and willing to enter into a valid contract. Intention to create a legal relationship is defined as the intention to enter a legally binding agreement or contract. The parties are ready to accept the legal consequence in case of a breach of a contract. It means they are ready to enter into contract. The persons entering into contract should not get confused by different objects but having same name for e.g. car named fury and horse named fury . in such case contract is void. Hence all these elements are required for a valid contract.
Hence, all these elements are required for a valid contract. If these are absent then the contract is void.
The essentials of a valid contract are there must be at least 2 or more parties. Proper offer and proper acceptance with intention to create legal relationship should be there. consideration must not be unlawful, Immoral or opposed to the public policy .The consent of the parties must be genuine consent means agreed upon the same thing in the same sense, a consent is said to be free when it is not caused by coercion and undue influence fraud misrepresentation on mistake. The object of the contract should be lawful. The parties to the contract must have capacity to make valid contract under section 11 of Indian Contract Act. The terms of the agreement should be capable of performance. The terms of the agreement are certain or capable of being made certain. The agreement should not be declared void or contract may be or in writing where a particular type of contract is required by law to be in writing and registered it was comply with necessary formalities as to writing registration and attestation.