Introduction

A contract is the foundation of all civil and commercial transactions in today’s society. A contract develops legal obligations among parties and provides a blueprint for enforcing duties and rights. In India, the Indian Contract Act, 1872, which came into force on 1st September 1872, governs the law of contracts. According to Section 2(h) of the Act, a contract is defined as “an agreement enforceable by law.” The definition clearly indicates that a contract is indeed an agreement that can be enforced and recognized by the law. However, not all agreements are contracts. Only contracts that satisfy some legal necessities are valid and can be enforced. These necessities are referred to as the essentials of a valid contract.

Offer and Acceptance

The first essential of a valid contract is a valid offer and a valid acceptance. A contract begins when one of the parties makes an offer and the other accepts it. Under Section 2(a), an offer, or proposal, is made when a person expresses to another his intention to do or not to do something for the purpose of obtaining the assent of the other. Section 2(b) defines acceptance as the act of expressing assent to the offer. The offer and the acceptance must be communicated clearly, must be absolute and unqualified, and must indicate the intention of creating a legal relationship. Acceptance must be accepted in the manner prescribed, or in a reasonable way if none is specified. The ancient case of Lalman Shukla v. Gauri Dutt (1913) is a precedent that an offer must be communicated to the offeree at the time of acceptance; otherwise, no legally enforceable contract arises.

Intention to create legal relations

The second one is the intention to create legal relations. A social, domestic, or moral agreement that does not create a legally enforceable contract. For instance, an agreement among relatives to split the expenses on living or eating together is not legally enforceable. Business contracts, however, are presumed to have this intent, and it must be refuted. The doctrine has been laid down in Balfour v. Balfour (1919), where the court held that a husband’s promise to pay an allowance to his wife was not enforceable at law since it was an agreement pertaining to the domestic sphere and the intention was not to create legal obligations.

Lawful consideration

The third component is lawful consideration, as understood under Section 2(d) of the Act. Consideration is the cost of the promise; it is value given in exchange for an additional promise. Consideration has to be legal, real, and of value to the law. It can move from the promisee or from any other party, as was held in Chinnaya v. Ramaya (1882), where it was established that a contract where consideration was given by a third person was enforceable. But Section 25 of the Act prescribes that a contract without consideration is void subject to certain conditions, like contracts which have been made out of natural love and affection, promises in satisfaction for past voluntary services, and written promises to pay debts barred under the limitation.

Capacity of Parties

Yet another essential ingredient is the capacity of the parties to make a contract. Section 11 provides that any person who has come of age, of sane mind, and not disqualified by law can enter into a contract. A contract entered into by a person of unsound mind or a minor is void ab initio, as established in Mohori Bibee v. Dharmodas Ghose (1903). But a child may be benefited under a contract or be a beneficiary in certain cases, such as becoming a recipient of a trust or property, or a scholarship.

Free consent

The fifth requirement is free consent that does not allow either party to agree to something else in the same way. Section 14 provides that free consent is consent that is not induced by fraud, undue influence, misrepresentation, or mistake, or coercion. If any of the above factors are present, the consent is not voluntary, and the contract is voidable at the discretion of the aggrieved party. Ranganayakamma v. Alwar Setti (1889) is a leading case where the court held that coercion of a widow’s consent to adoption is invalid. Thus, voluntary consent is the foundation of the validity of a contract.

Lawful object

A valid contract must also have a lawful object. Section 23 of the Act provides that an object of an agreement is illegal if it is against the law, fraudulent, gives hurt to a person or property, or is against public policy. For example, agreements to do an offence, defraud creditors, or corrupt are void. The Supreme Court in Gherulal Parakh v. Mahadeodas Maiya (1959) was of the opinion that wagering contracts are void but not illegal in themselves unless statutorily prohibited. The provision is inserted so that only contracts with good purposes can be enforced.

Certainty and Possibility of Performance

Yet another important factor is certainty and the possibility of performance. According to Section 29, such agreements that are ambiguous in their terms or cannot be made certain are void. In the same way, Section 56 provides that agreements to perform something impossible to perform are void ab initio. Therefore, the contract needs express terms, and the obligations need to be possible to perform. For instance, a contract to locate treasure through the aid of magic or bring back a dead man to life would be void based on the impossibility of performance.

Not Declared Void or Illegal

Finally, for a contract to be enforceable, it is not supposed to be clearly expressed to be void under the Act. Certain contracts, while fulfilling other criteria, are expressed to be void on public policy grounds. Such are contracts in restraint of marriage (Section 26), restraint of trade (Section 27), restraint of legal proceedings (Section 28), and wagering contracts (Section 30). These restrictions ensure fairness and maintain the sanctity of contractual transactions in society.

Conclusion

The Indian Contract Act, 1872, provides a detailed framework for determining the validity of contracts. An agreement must meet significant requirements such as a lawful offer and acceptance, lawful consideration, capacity of parties, free consent, lawful object, and certainty. Absence of any one of them can render an agreement void, voidable, or unenforceable. The Act thus not only encourages fair and open business transactions but also protects individuals from exploitation, dishonesty, and unethical transactions. It is indispensable for every party to contracts in India to know these fundamentals as they are the foundations of all contractual obligations arising out of contracts.