If we analyze the definition of the contract, we find that a contract consists of two elements
(1) An agreement
(2) its enforceability by law
Agreement: An agreement is defined as "every promise and every set of promises forming consideration for each other.
An agreement must be enforceable by law: When an agreement must give rise to a legal obligation, such agreement becomes a contract. The term obligation indicates a legal duty
imposing upon a definite person or persons, the necessity of doing or abstaining from doing a definite act or acts.
Now we check out some important elements of the Indian contract.
1.Offer and acceptance
There must be two parties to an agreement i.e., one party making the offer and the other party accepting it. The terms of the offer must be definite and the acceptance of the offer must be absolute and unconditional.
2.Consensus ad-idem
There must be consensus-ad-idem. This means that the parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time.
For example, A owns two horses named Kalyani and Kadambari. He is selling the horse, Kalyani to B. B thinks, he is purchasing the horse, Kadambari.
There is no identity of minds i.e. consensus-ad-idem and consequently no contract.
3.Intention to create a legal relationship
When two parties enter into an agreement, their intention must be to create a legal relationship between them.
Agreements of social or domestic nature do not create a legal relationship. As such they are not contracts.
For example, a husband promised to pay his wife a household allowance of Rs. 30 every month. Later the parties separated and the husband failed to pay the amount. The wife sued for the allowance.
4.Lawful consideration
The agreement is legally enforceable only when both the parties give something and get something in return.
A promise, to do something, getting nothing in return, is usually not enforceable by law. Consideration may be in cash or kind,
promise to do or not to do, past or present or future. But it must be real and lawful.
5.Capacity of parties (Competency)
The parties to the agreement must be capable of entering into a valid contract. Every person is competent to contract if he is of the age majority, of sound mind, and not disqualified by any law.
Incompetency to a contract may arise from minority, lunacy, idiocy, drunkenness, etc.
6.Free and genuine consent
Free and consent of the parties to the agreement are essential for the creation of every contract. There is an absence of free consent if the agreement is induced by coercion, undue influence, fraud, misrepresentation etc.
7. Lawful object
The object of the agreement must be lawful. It means that the object must not be illegal, immoral, or opposed to public policy. If it is so, it would not be enforceable by law.
8. Agreement genuine not declared void
The agreement must not have been expressly declared void by any law in force in the country.
9. Certainty and possibility of performance
The agreement must be certain and not vague or indefinite. If it is vague and is not possible to ascertain its meaning. it cannot be enforced.
Ex: agreed to purchase a motor van from S on hire purchase system. The hire purchase price was to be paid over two years.
It was held in a case Scammel Vs. Ouston that there was no contract as the terms were not certain about the rate of interest and mode of payment.
10.Legal formalities
A contract may be made by words spoken or written. However that the contract should be in writing in the interest of both the parties to the contract.
There are some legal formalities to have complied within order to make an agreement legally enforceable.
They include if the contract is to be incorporated, it must be stamped. In some cases, a contract has to be written in the presence of a witness and registered. Statutory requirements of this kind must have complied within order to contract enforceable at law.
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