Indian Contract Act, 1872: essentials of a valid contract
Section-by-section notes on what makes an agreement enforceable, with the leading cases and exam-style questions.
Key definitions (Section 2)
- Proposal (offer), s. 2(a): when one person signifies to another their willingness to do or abstain from doing anything, with a view to obtaining that person’s assent.
- Acceptance, s. 2(b): when the person to whom the proposal is made signifies their assent. A proposal, when accepted, becomes a promise.
- Consideration, s. 2(d): something done, abstained from or promised by the promisee or any other person, at the desire of the promisor.
- Agreement, s. 2(e): every promise and every set of promises forming consideration for each other.
- Contract, s. 2(h): an agreement enforceable by law.
Remember the formula: Contract = Agreement + Enforceability. All contracts are agreements, but not all agreements are contracts.
Section 10: what makes an agreement a contract
All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
From s. 10 and the general law, the essentials are:
1. Offer and acceptance. There must be a lawful offer and a lawful acceptance of it. Acceptance must be absolute and unqualified (s. 7) and communicated. Case: Lalman Shukla v. Gauri Dutt (1913): a person who finds a missing boy without knowing of the reward cannot claim it; there can be no acceptance without knowledge of the offer.
2. Intention to create legal relations. Social and domestic agreements are generally not meant to be legally binding. Case: Balfour v. Balfour (1919): a husband’s promise of a monthly allowance to his wife was a domestic arrangement, not a contract.
3. Lawful consideration (ss. 2(d), 23, 25). Each party must give something in return. Consideration may be past, present or future, need not be adequate, but must be real and lawful. An agreement without consideration is void, subject to the exceptions in s. 25 (for example, a registered written promise made out of natural love and affection between near relatives).
4. Capacity of parties (ss. 11 and 12). A person is competent if they have reached the age of majority (18 under the Indian Majority Act, 1875), are of sound mind, and are not disqualified by law. Case: Mohori Bibee v. Dharmodas Ghose (1903): an agreement with a minor is void ab initio (void from the beginning).
5. Free consent (ss. 13–22). Consent is free when it is not caused by coercion (s. 15), undue influence (s. 16), fraud (s. 17), misrepresentation (s. 18) or mistake (ss. 20–22). Consent caused by coercion, undue influence, fraud or misrepresentation makes the contract voidable at the option of the aggrieved party (ss. 19, 19A). A mutual mistake of fact essential to the agreement makes it void (s. 20).
6. Lawful object (s. 23). The object or consideration is unlawful if it is forbidden by law, would defeat the provisions of any law, is fraudulent, involves injury to the person or property of another, or is immoral or opposed to public policy.
7. Not expressly declared void (ss. 24–30). Examples include agreements in restraint of marriage (s. 26), in restraint of trade (s. 27, with exceptions), in restraint of legal proceedings (s. 28), uncertain agreements (s. 29) and wagering agreements (s. 30).
8. Certainty and possibility of performance (ss. 29, 56). The meaning must be certain, and an agreement to do an act impossible in itself is void.
9. Legal formalities. Most contracts may be oral, but where a statute requires writing, registration or stamping, those formalities must be met.
Valid, void and voidable: a quick comparison
| Valid | Void | Voidable | |
|---|---|---|---|
| Enforceable? | Yes | No | Yes, until the aggrieved party avoids it |
| Example | A sale with all essentials | Agreement with a minor | Consent obtained by coercion |
Exam-style questions
Short answer (2 marks each)
- Define a contract under s. 2(h).
- What is consideration?
- State the rule in Mohori Bibee v. Dharmodas Ghose.
Paragraph (5 marks each) 4. “All contracts are agreements, but all agreements are not contracts.” Explain. 5. Distinguish between void and voidable contracts.
Essay (10 marks) 6. Explain the essentials of a valid contract under the Indian Contract Act, 1872, with suitable cases.
Always check the bare Act for the exact wording of each section before an exam.
Questions students ask
What are the essentials of a valid contract?
Offer and acceptance; intention to create legal relations; lawful consideration; parties competent to contract; free consent; a lawful object; the agreement not being expressly declared void; certainty and possibility of performance; and any legal formalities the law requires, such as writing or registration.
What is the difference between a void and a voidable contract?
A void agreement is not enforceable at all, for example an agreement with a minor. A voidable contract is enforceable until the aggrieved party chooses to avoid it, for example a contract where consent was obtained by coercion or fraud.
Can a minor enter into a contract in India?
No. Under section 11 of the Indian Contract Act a minor is not competent to contract, and in Mohori Bibee v. Dharmodas Ghose (1903) the Privy Council held that an agreement with a minor is void from the beginning.
Is an agreement without consideration valid?
Generally no: section 25 makes an agreement without consideration void. The exceptions include a written, registered promise made out of natural love and affection between near relatives, a promise to compensate someone who voluntarily did something for the promisor, and a written promise to pay a time-barred debt.
What is free consent?
Consent is free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake (sections 14 to 22 of the Indian Contract Act).