Essential elements of a contract
Contract is basically a bargain between two parties, each receiving ‘something’ of value or benefit to them. This ‘something’ is described in law as ‘consideration’. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought. A contract without consideration is void. The consideration may be in the form of money, services rendered, goods exchanged or a sacrifice which is of value to the other party.
Indian contract act !"#$#% section provides that& An agreement which is legally enforceable by b y law is a contract. Agreements which are not legally enforceable are not contracts void agreements which are not enforceable at all or as voidable agreements which are enforceable by only one of the parties to the agreement. 'All contracts are agreements, but all agreements are not contracts.( An agreement becomes enforceable by law when it fulfills certain condition. This condition is the essential element of contract contract and and these are giving below
. )a )art rtie iess to to cont contra ract ct #. *a *awf wful ul of offe ferr an and d ac accep cepta tance nce +. *a *awf wful ul co cons nsid ider erat atio ion n . Int Intent ention ion to to creat createe legal legal rel relati ation on -. *e *ega gall cap capac aciity . /ree co consent ". *e *egal galit ity y of of th thee ob0 ob0ect ect !. *a *awf wful ul pur purpo pose se and and ob0 ob0ec ectt 1. )os )ossib sibili ility ty of per perfor forman mance& ce& 2. cer certai tainty nty . 3oid agreement agreement #. /orm /ormali alitie tiess
pa rties to ma4e a contract. Parties to contract: There must be two or more parties
Offer and Acceptance &
5hen one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence he is said to ma4e a proposal. The first step towards creating a contract is that one person shall signify or ma4e a proposal or offer to the other, with a view to obtaining the acceptance of that another person to whom the offer is made. A proposal when accepted becomes a promise. 5hen the person to whom the proposal is made signifies his assent there of the proposal is said to be accepted. A proposal when accepted becomes a promise. Lawful Consideration:
5hen at the desire of the promisor the promisee or any other person has done or abstained from doing, or does or abstains from doing or promises to do or to abstain from doing something such act or abstinence or promise is called a consideration for the promise. 6very contract consists of two parts 7 $% )romise and $#% Consideration for the promise. A promise is often made in return for a promise for example a buyer reali8es the goods for the price. )rice for goods is therefore, consideration here.
Intention to create legal relations
A contract does not exist simply because there is an agreement between p eople. The parties to the agreement must intend to enter into a legally binding agreement. This will rarely be stated explicitly but will usually be able to be inferred from the circumstances in which the agreement was made. /or example, offering a friend a ride in your car is not usually intended to create a legally binding relation. 9ou may, however, have agreed with your friend to share the costs of travelling to wor4 on a regular basis and agree that each /riday your friend will pay you :#2 for the running costs of the car. ;ere, the law is more li4ely to recogni8e that a contract was entered into. Commercially based agreements will be seen as including a rebuttable intention to create a legally binding agreement.
Legal capacity
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people who have a mental impairment= young people $minors%= ban4rupts= corporations $people acting on behalf of a company%= and
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prisoners.
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Free consent: To ma4e contract it is essential that the consent of the parties to enter in to the
contract is free. ;ere free consent means the consent which is not affected by coercion, undue influence, mista4e, misrepresentation, and fraud.
Legality of the object:
The ob0ect for which the agreement has been entered into must not be illegal,or immoral or opposed to public policy Certainty:
The terms of a contract should be clear. In other words, the contract must not be vague. Contracts which are vague cannot be enforced. Possibility of performance:
Contracts based on impossibility of performance are not valid. The contracts must be capable of being performed. oid agreement :
A contract must be a form which is not declared as void with any relevant loss. Formalities:
A contract may be writer or oral and registered or none registered according to the provision of relevant to loss.
Consideration is an essential part of contract! E"ceptions to the #ule$ %&o Consideration$ &o Contract'
&o Consideration$ &o Contract
Consideration being one of the essential elements of a valid contract the general rule is that 'an agreement made without consideration is void. >ut there are a few exceptions to the rule,where an agreement without consideration will be perfectly valid and binding. These exceptions are as follows&
(!&atural lo)e and affection *+ec! ,-.(/0
An agreement though made without consideration will be valid if it is in writing and registered and is made on account of natural love and affection between parties standing in a near relation to each other. An agreement without consideration will be valid provided7 $a% it is expressed in writing= $b% it is registered under the law for the time being in force= $c% it is made on account of natural love and affection= $d% it is between parties standing in a near relation to each other. All these essentials must be present to enforce an agreement made without consideration.
,! Compensation for ser)ices rendered *+ec! ,-.,/0
An agreement made without consideration will be valid if it is a promise to compensate wholly or in a part a person who has already voluntarily done something for the promisor or
something which the promisor was legally compellable to do.To apply this rule, the following essentials must exist& $a% The act must have been done voluntarily= $b% for the promisor or it must be something which was the legal obligation of the promiser= $c% the promisor must be in existence at the time when the act was done= $d% the promisor must agree now to compensate the promisee.
1! 2ime3barred debt *+ec! ,-.1/0
A promise to pay a time7barred debt is also enforceable. >ut the promise must be in writing and be signed by the promisor or his agent authori8ed in that behalf. The promise may be to pay the whole or part of the debt. An oral promise to pay a time7barred debt is unen forceable
4! Completed gifts *E"p! ( to +ec! ,-0
6xplanation to section #- provides that the rule ?
-! Agency .+ec! (5-/
There is one more exception to the rule. IT is given in section !- which says that no consideration is needed to create an agency.
