Essentials of Valid Contract as per Indian Contract Act

Here we have discussed all the Essentials of  Valid Contract as per Indian Contract Act. One can also come to know, what is a contract, What is a valid contract, what are the essentials of valid contract. It is very important to understand the essentials of valid contract as per Indian contract Act. The below discussed points will decide whether a contract will be valid or not hence these points are called as Essentials of Valid Contract as per Indian Contract Act.

Meaning of Contract

A contract is an Agreement made between two or more parties which the Law will enforce.  An agreement is every Promise and every set of promises , forming consideration for each other.

If we analyze the above said things, we can find that a contract essentially consist of 2 elements 1. Agreement 2.Its enforceability by Law

It could be defined simply that:-

Contract = Agreement + Enforceable by law.

Agreement = Offer + Acceptance.


The below said are few examples of contract which we enter in day to day life

Eg 1 :- when you travel in a bus, you enter into a contract with that bus company

Eg 2:- when you purchase a pen, you enter into contact with that vendor.

Even though the enforceability of law is less in these examples these are simple examples of Contract .

Meaning of Valid Contract:

Valid contract is the one which is enforceable by law. There are the various type of contract namely, void contract, voidable contract, illegal contract, unenforceable contract and valid contract. The type of the contract will be decided based on the legality of the contract. A Contract will be considered as a valid contract when it satisfy certain essentials of a valid contract.

Essentials of Valid Contract as per Indian Contract Act

Below discussed are the essentials of Valid contract as given in the Indian Contract Act. If any of the one essentials is missing then it can not be termed as valid contract. Hence to check the validity of the contract, to know whether it is a valid contract or not then you have to see whether all the below discussed points are applicable or not. When ever we enter into any business related transactions we have to check whether we are entering into a valid contract. If we don’t enter into a valid contract in case of any breach we can’t claim for damages.

In order to become a contract , an agreement must have the following:

1) Offer and Acceptance

  • Their must be two parties . One must initiate the offer (offeror) and the other should accept it (offeree or acceptor) .
  • The offer must be definite and the acceptance must be absolute and unconditional.
  • The acceptance must be communicated to the offeror by the offeree.

2) Intention to create legal relationship

In all social agreements usually people do not intend legal relationship. However  in business agreements people intend to enter legal relationship.

E.g.. An invited B for his sister marriage and B accepts to attend the function. But B did not go to the function . A cannot sue B as there is no legal agreement.

3) Lawful Consideration

Consideration is something in return means the benefit move from one party to another. Both should give something and take something in return. It can be present past or future but it should be real and lawful.

E.g.. If X agrees to sell his car to Y for Rs.100000 without any expectation for Y then there is no consideration so not a Valid contract

Following are considered as lawful consideration:

  • Can be past present and future
  • Move from one party to another
  • Need not be adequate
  • Must be legal
  • Must be certain ( should be clear)
  • Must be not something which he is already eligible ( e.g. Fees to the Lawyer)

Exemptions for No consideration No contract:

In certain case the give exemption for certain contracts. In these contracts even though there is no consideration for one one party, still it is considered as valid contract. Below discussed are some examples for the rule no consideration no contract.

  • Love and affection
  • Charity
  • Own will
  • Time barred debt

4) Capacity of the parties

The laws have termed certain persons as incapable to  enter into a contract . So the contract  enters with such persons are not valid.

The persons who are not capable are:

  • Minor
  • Unsound mind
  • Drunken
  • Disqualified under any Act
  • Insolvent

5) Free and Genuine Consent

Both the parties should agree the subject matter of the contract in the same sense and with the same mind over all terms. If the consent given by the parties is not a consent given with free mind, If it is obtained through force, using authority, giving false information etc then that consent is not called as free and genuine consent. Such contract is also not a valid contract.

E.g.  X has two laptops  Sony and Acer with different configurations. B agrees  to purchase one among them While enter in to the contract X was Intend to sell Sony but B enters thinking that the agreement is to sell Acer laptop. This is not a genuine contract as the subject matter was not properly understood.

Consent of the party is considered as a free and genuine consent when it is not obtained through any of the following:

  • Coercion (threatening  e.g. Suicide)
  • Undue influence ( Force)
  • Fraud
  • Misrepresentation

6) Lawful Object 

The object of the contract should be legal moral and should not be against public policy (sec.23)

7) Agreement not declared void 

The agreement must not have been expressly declared void by law in force in the country ( sec . 24 to 30). An agreement which is not enforceable by Law is called Void Agreements.(sec 2 (9)). The Agreements which are coming under any of the below said criteria then it is called as void agreements.

  • Agreement by incompetent parties (Sec 11)
  • Agreement under mutual mistake of fact ( Sec 20 )
  • Agreement in which the consideration or object is not lawful (Sec 23)
  • Agreement in which the consideration or object is not lawful in part (Sec 24)
  • Agreement made without consideration(sec 25)
  • Agreement in restrain of marriage. (Sec 26)
  • Agreement in restrain of trade (Sec 27)
  • Agreement in restrain of legal proceedings (Sec 28)
  • Agreements to do impossible Acts(Sec 56)
  • Agreements contingent on impossible event (Sec 36)

Wager Agreement (Sec 30):It is an agreement  between two parties by which one party agrees to pay money on the happening of some uncertain event in consideration of the other party’s promise to pay if the event does not happen.

8) Certainty and possibility

The meaning of the terms of contract must be definite and the performance or execution must be certain and possible.

9) Legal formalities 

A contract may either be in writing or oral. But for the interest of the parties a contract should be in written. Sometimes it needs duly stamped or registered .

The above discussed are the points which will determine whether a contract is a valid contract or not. These points are called as Essentials of valid contract as per Indian contract Act.

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