Core Elements of a Valid Contract Under the Indian Contract Act, 1872

Contracts are an essential part of everyday life. From buying groceries online to signing employment agreements and property deals, contracts govern our personal and professional relationships. In India, contracts are regulated by the Indian Contract Act, 1872, which clearly lays down the essential elements required to form a legally enforceable contract. If any one of these elements is missing, the agreement may not be enforceable in a court of law.

What Is a Contract?

According to Section 2(h) of the Indian Contract Act, a contract is “an agreement enforceable by law.” For an agreement to become a contract, it must satisfy certain legal requirements laid down in the Act. These requirements are known as the essential elements of a valid contract.

1. Offer and Acceptance

The first and most basic element of a contract is an offer by one party and acceptance by the other. An offer is defined under Section 2(a) as a proposal made by one person to another with the intention of obtaining consent. Acceptance, under Section 2(b), occurs when the person to whom the proposal is made agrees to it.

The acceptance must be:

• Absolute and unqualified

• Communicated to the offeror

Case Law: Carlill v. Carbolic Smoke Ball Co. (1893)

The court held that a unilateral offer made to the public can be accepted by performance, creating a binding contract.

2. Lawful Consideration

Consideration refers to something of value exchanged between the parties. According to Section 2(d), consideration may be an act, abstinence, or promise.

Consideration must be:

• Lawful

• Real and not illusory

• Not opposed to public policy

Case Law: Chinnaya v. Ramayya (1882)

The court held that consideration need not move directly to the promisor, as long as it is lawful.

3. Competent Parties

Under Section 11, only persons who are:

• Of the age of majority

• Of sound mind

• Not disqualified by law

are competent to contract.

Case Law: Mohori Bibee v. Dharmodas Ghose (1903)

The Privy Council held that a contract with a minor is void ab initio and unenforceable.

4. Free Consent

Consent must be free and genuine. Under Section 14, consent is said to be free when it is not caused by:

• Coercion

• Undue influence

• Fraud

• Misrepresentation

• Mistake

If consent is not free, the contract becomes voidable.

Case Law: Ranganayakamma v. Alwar Setti (1889)

A contract obtained through undue influence was held voidable at the option of the aggrieved party.

5. Lawful Object

The object or purpose of the contract must be lawful. According to Section 23, a contract is unlawful if:

• It is forbidden by law

• It defeats the provisions of any law

• It is fraudulent or immoral

• It is opposed to public policy

Contracts with unlawful objects are void.

Case Law: Pearce v. Brooks (1866)

An agreement for an immoral purpose was declared void.

6. Certainty of Terms

The terms of the contract must be clear and certain. Section 29 states that agreements with uncertain terms are void.

Example

An agreement to sell “a reasonable quantity” without clarity is void due to uncertainty.

7. Possibility of Performance

The contract must be capable of being performed. Agreements to do impossible acts are void under Section 56.

Case Law: Taylor v. Caldwell (1863)

The destruction of the subject matter made the contract void due to impossibility.

8. Intention to Create Legal Relations

There must be an intention to create legal relations. Social and domestic agreements are generally not legally enforceable.

Case Law: Balfour v. Balfour (1919)

A domestic arrangement between husband and wife was held not to be a contract.

9. Not Expressly Declared Void

Certain agreements are expressly declared void under the Act, such as:

• Agreements in restraint of marriage

• Agreements in restraint of trade

• Wagering agreements

Conclusion

The Indian Contract Act, 1872 lays down clear and comprehensive rules to determine whether an agreement is legally enforceable. Each core element plays a crucial role in forming a valid contract. Missing even one essential element can render an agreement void or voidable. By understanding these elements, individuals and businesses can ensure fairness, certainty, and legality in their contractual dealings.