Preface
An agreement turns into a contract when it becomes enforceable at law. A contract is usually an exchange of promises between two or maybe more persons. It results in an obligation to do or refrain from doing a particular act.
Relevant Provision
Sections 2(h), 10, 11, 14, 17, and 23 of the Contract Act, 1872.
Definition of Contract
Section 2(h) of the Contract Act, of 1872 defines a contract as follows;
“An agreement enforceable by law is a contract”.
An agreement becomes a contract when it is enforceable at law and it becomes enforceable when it fulfills the Conditions laid down in Section 10 of the Contract Act, of 1872.
NOTE: All agreements are not contracts but all contracts are agreements.
Example: A agrees to sell his house for Rs. 70 Lac to B. It is a contract because the agreement between A & B is enforceable by law and the law treats their agreement for the sale or purchase of the house as valid.
Essentials of a Valid Contract
Following are the essentials of a contract that are provided by section 10 of the contract act, of 1872
1. Agreement
An agreement between the parties is required for the purpose of making a contract. For a valid agreement, there must be two parties, one making a “Proposal” & other giving “Acceptance”. Acceptance must be unconditional and in the same mode as prescribed & communicated with each other.
In this way, Proposal and Acceptance are very important for a contract. They are one of the essential ingredients of the contract.
2. Consensus at idem
There must be consensus ad idem to constitute a valid contract between the parties. Unless the minds of both parties agree on the same thing in the same sense, a contract will not be considered valid.
3. Legal Relationship
For a valid contract, the parties to an agreement must create a legal relationship. As far as social & domestic agreements do not create a legal relationship in daily routine.
4. Lawful Consideration
It is one of the most important elements of a contract. It may be past, present, or future. For a valid contract, the consideration must be lawful. A contract whose consideration is not lawful is considered to be illegal under Section 23 of the Contract Act 1872, and thus it is declared to be void.
Usually, a promise to give or to do something for nothing in return is not enforceable by law.
5. Capacity of Parties
It is essential that the parties to an agreement must be competent enough to make a contract, otherwise, the contract is not enforceable by law. The capacity of the parties to make a contract can be affected by the status of the parties such as minors, drunken persons, etc.
Section 11 of the Contract Act, of 1872 says,
Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and who is not disqualified from contracting by any law to which he is subject.
6. Free Consent
For a valid contract, it is necessary that the consent of the parties to the contract must be free. According to Section 14 of the Contract Act, of 1872, consent is said to be free when it is not caused by:
- Coercion U/s 15 of the Contract Act, 1872
- Undue influence U/s 16 and 19(A) of the Contract Act, 1872
- Fraud U/s 17 of the Contract Act, 1872
- Misrepresentation U/s 18 of the Contract Act, 1872
- Mistake U/s 20 and 22 of the Contract Act, 1872
7. Lawful Object
The agreement must be made for a lawful object. The agreement, of which the object or consideration is unlawful, is illegal and as a result, it becomes void.
Section 23 of the Contract Act, of 1872 states that contracts should be made for legal or lawful objects. This means that the object of entering an agreement should not be illegal or fraudulent or immoral or against public policy.
Example: Three persons such as A, B, and C reach an agreement to divide the grain amongst themselves which they intend to get by fraud. The object of this agreement is unlawful therefore it would be declared void.
8. Not expressly declared Void by Law
An agreement must not have been declared void by any law in force in the country. Sections 24 to 30 of the Contract Act, of 1872, deal with agreements that have been valid rather they will be void.
9. Certainly of Terms
In order to make a valid contract, the terms of the agreement must be clear, complete & certain. If the terms of an agreement are uncertain, it cannot be enforced by a court of law.
10. Legal Formalities
The contract must be in writing, signed and attested by witnesses, and registered if so required by the law in force. Section 17 of the Registration Act, of 1908 requires certain documents to be registered. Thus a valid contract has to abide by such formalities provided by law.
11. Possibility of Performance
The contract must be capable of being performed. In case, the act is legally or physically impossible to perform, the agreement cannot be enforced at law.
Final Note
All contracts are agreements, but all agreements are not contracts. Those agreements that are enforceable by law, become contracts. The promises that do not meet the requirements of a contract are not enforceable. It must be entered in with free consent, lawful consideration, and object and not expressly declared to be void under any law.
FREQUENTLY ASKED QUESTIONS
Every contract is an agreement, but every agreement is not a contract. Discuss with reference to the essentials of a valid contract.
(2019-A 5 years)
What are the essentials of a valid contract? Discuss in detail.
(2019-A, 2018-A, 2017-S, 2016-S, 2015-s, 2015-A, 2014-S)
All contracts are agreements but all agreements are not contracts. Discuss with reference to the essentials of a valid contract.
(2017-A, 2016-A, 2014-A)
Explain in detail the essentials of a valid contract in light of Section 10 of the law of contract in Pakistan.
(2010-S)
An agreement enforceable by law is called a contract. Discuss it with reference to the rules relating to the validity of the contract.
(2008-S)
REFERENCES
- The Contract Act, 1872
- N-Series by M.A. Chaudhary
- Law of Contract by Avtar Singh
