Lecture: 2
ESSENTIAL ELEMENTS OF A VALID CONTRACT:
Essential elements of a valid contract –
Under Section 10 – Not given under section 10 but still are
essentials of valid contract –
a) Agreement
b) Free Consent a) Two parties
c) Competency of the parties b) Intention to create
d) Lawful Consideration legal relationship
e) Legal object c) Legal formalities
f) Not expressly declared to d) Certainty of meaning
be void e) Possibility of performance
1) Two parties –There should be at least 2 parties for a contract.
2) Offer –There shall be an offer or proposal by one party
3) Acceptance –Offer made should be accepted by the other party
4) Lawful consideration –The agreement shall be supported by lawful consideration
5) Lawful object –The object and consideration of the contract shall be legal
6) Competent (capacity) to contract – Section 11
a) The parties to the contract shall be competent to contract
b) For a person to become competent to contract –
Such person should be major (18+)
Such person should be of sound mind (Section 12)
Such person should not be disqualified by law
7) Free consent –
a) There shall be free consent between the parties to the contract
b) Consent is said to be free when the following elements are absent (Section 14)
Coercion (Section 15)
Undue influence (Section 16)
Fraud (Section 17)
Misrepresentation (Section 18)
Mistake (Section 20, 21, 22)
8) Intention to create legal relationships – The intention of the parties to a contract must
be to create a legal relationship between them. Example: A husband promising his wife to
buy her a ‘necklace’ on occasion of her birthday is not a contract.
9) Possibility of performance – The agreement should be capable of being performed
Example - if A promises B to bring rainfall through magic. Such agreement cannot be
enforced
10) Legal formalities – Legal formalities if any required for particular agreement such as
registration, writing, they must be followed.
OFFER –
A) Definition – Section 2(a)
When one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence, he
is said to make a proposal
B) Types of offer –
1) General Offer - It is an offer to the whole world.
2) Specific offer - It is an offer made to a particular person or group of persons.
3) Express offer - It is an offer which is made by words either oral or in writing.
4) Implied offer - It is an offer which is made by conduct or gesture of the
parties.
5) Counter offer - When a person to whom the offer is made does not
accept the offer [as it is] he counters the condition. This is called counter offer.
6) Cross offer - When two offers of same terms and conditions cross each other
at same time, it is called cross offer.
7) Standing offer - An offer is a standing offer if it is intended to remain open for
a specified period
C) Essentials of valid offer –
1) Offer may be expressed or implied –
An offer may be expressed or may be implied from the conduct of the parties or
circumstances of the case.
2) Offer may be specific or general –
a) A specific offer is one which is made to a particular person. It can be
accepted by the person to whom it has been made, no one else can accept
such an offer.
b) A general offer is an offer made to the public at large.
3) Offer must create Legal Relations –
An offer to be valid must create legal relationship between the parties. Say for
example a dinner invitation extended by A to B is not a valid offer.
4) Offer must be Clear, not Vague –
The terms of an offer should not be vague (not clear / confusing)
For e.g. - A offers to sell B fruits worth Rs 5000/-. This is not a valid offer since
what kinds of fruits or their specific quantities are not mentioned.
5) Offer must be Communicated to the Offeree –
No offeree can accept the proposal without knowledge of the offer (Lalman
Shukla v. Gauri Dutt.)
6) A statement of price is not an offer
7) Offer cannot contain a Negative Condition –
The non-compliance of any terms of the offer cannot lead to automatic acceptance
of the offer Example: A offers to sell his cow to B for 5000/-. If the offer is not
rejected by Monday it will be considered as accepted. This is not a valid offer.
8) A mere statement of intention is not an offer. Thus, a person who attended the
advertised place of auction could not sue for breach of contract if the auction was
cancelled
9) Offer must be distinguished from an invitation to offer –
BASIS FOR
OFFER INVITATION TO
COMPARISON
OFFER
Meaning When one person expresses his will When a person expresses
to another person to do or not to do something to another person, to
something, to take his approval, is invite him to make an offer, it
known as an offer. is known as invitation to offer.
Defined in Section 2(a) of the Indian Not Defined
Contract Act, 1872.
Objective To enter into contract. To receive offers from
people and negotiate
the terms on which the
contract will be
created.
Essential to Yes No
make an
agreement
Consequence The Offer becomes an agreement An Invitation to offer,
when accepted. becomes an offer when
responded by the party to
whom it is made.
