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7 Essential Elements of a Contract (Indian Contract Act)

December 21, 2018 0 Comment

(c) Capacity of parties to contract competent parties

(d) Writing and Registration if so required

(e) Legal relationship

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(f) Certainty

(g) Possibility of performance and enforceability by Law.

The initial steps towards a contract are that one person shall make a proposal or offer to the other, with a view to obtaining the acceptance of the person to whom the offer is made. A proposal when accepted becomes a promise.

According to Section 2 (b) of Indian contract Act is “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted”. A proposal when accepted becomes a promise. The person making the proposal is called promisor.

The second feature of a contract is consideration; Every contract has two parts – Promise and Consideration. A promise is made on return of a promise. When the seller sells a commodity to a buyer the buyer realizes the commodity paying the money for it.

So price of the commodity is consideration here. Consideration is the beginning and reason for promise, without consideration there is no agreement. As a rule, agreement without consideration is invalid. The situation may be better understood with the help of an example.

Assume Mr. X sells a property to Mr. Y for Rs 100000. Here X’s promise to sell his property and Y’s consideration is to pay him the stipulated sum of Rs 100000. Conversely, it is Y’s promise to pay the sum and X’s consideration to sell the property to Y. The promise for a promise in return is consideration.

An agreement becomes a contract if it is made for lawful consideration and with a lawful object. The consideration or object of an agreement becomes illegal if it is prohibited by law, it would defeat provisions of any law and is fraudulent, if it involves or implies injury to the person or property of another, and the court regards it as immoral or opposed to the policy.

Now let us see who can make a contract? According to section 11, a person capable of making contract should be major, he should not be insane and finally he should not possess any other disqualification which prohibits him from making any contract.

Parties to contract must give free consent, consent must be free. Free consent is an important feature of a valid contract. When two or more persons are said to consent when they agree upon the same thing in the same sense. The whole agreement must be done in the same sense. Consent is said to be free when it is not caused by (i) coercion (ii) undue influence (iii) fraud (iv) misrepresentation or (v) mistake.

A void agreement cannot be enforceable, by law. Neither does it have any legal approval nor gives rise to any obligation. An agreement therefore should not be void in order to constitute a valid contract. An agreement is not valid if it is made by an unsound person, or under mutual mistake.

Now let us see why a contract should be written and registered. Any important document like gift, mortgage, sale, lease memorandum and articles of association are written documents. However, there is no particular form of writing to constitute a contract.

Intentions of the parties to enter into a particular contract and to give effect to it must be manifest in it, in order to constitute a valid contract. For certain contract Registration is compulsory under Indian Registration Act, such as mortgages, gift etc.

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