Essentials of a Valid Contract

2019-07-03
The important and basic essentials of a valid contract under The Indian Contracts Act 1872
It is mandatory to know what is contract before knowing its essentials. So, here we go;
In India, the matters regarding the contract between the parties are governed under The Indian Contract Act, 1872. Wherein, every minute detail in respect to each aspect of the same is notified under this statute. No doubt that there is not a single definition of the term contract, many jurists have given its definition.
To start with, a Contract in the act means any “agreement [1] which is enforceable by law is a contract”, which means that there should be an agreement also; it should be administered by the laws of the country. Salmond elucidated contract as “an agreement creating and defining obligations between the parties”.
Further, Section 10 of the same act states the essentials that needed to be fulfilled for a contract to be a valid one. According to it, all agreements are contracts if they;
• Are made by free consent
• Parties competent to contract
• For a lawful consideration or, With a lawful object

1. FREE CONSENT
Consent under section 11 of the same act, means two or more persons are said to consent when they agree upon the same thing in the same sense.
The consent is said to be free when it is not obtained by;
o Coercion
o Undue influence
o Fraud
o Misrepresentation
o Mistake
In leading case, Mangaldas Raghavji Ruparel v. State of Maharashtra[2] , it was clearly interpreted that where consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is the contract voidable at the option of party whose consent was so obtained.

 Coercion: Coercion is committing or threatening to commit any act impermissible by the Indian Penal Code or the unlawful detaining or threatening to detain, any property to disadvantage of any person whatever with intention of causing any person to enter into an agreement [3].
For example; a Hindu by a threat of suicide induced his wife and son to execute a release in favour of his brother in respect of certain properties which they claimed as their own. It is coercion.

 Undue Influence: A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other[4] .
For example; a spiritual adviser induced the plaintiff, his devotee, a gift to him the whole of his property to secure benefits to his soul in the next world. Such consent is said to be obtained by undue influence.[5]

 Fraud: Fraud means and includes any suggestion, active concealment of fact, a promise made without intention of fulfilling it, other act fitted to deceive, act or omission as law specially declares to be fraudulent[6] .

 Misrepresentation: Misrepresentation means and incorporates the positive assertion, any breach of duty, causing innocently a party to agreement [7].

 Mistake: A contract is not voidable because it was caused by a mistake as to any law in force; but a mistake as to a law not in force in India has the same effect as a mistake of fact[8] .The scope for operative mistake as to identity is further reduced when the parties are in each other’s presence[9] .

2. PARTIES COMPETENT TO CONTRACT :
Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject[10].
A contract of marriage, entered into by father for benefit of his minor child is not void for want of consideration, unlike a contract of service by a minor which is a contract of service entered into by a father on behalf of minor which is not enforceable as it is void for want of consideration[11].
A person is said to be of sound mind for purpose of making a contract, if, at time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.[12]
In the well-known case of "Mohori Bibee v. Dharmodas Ghose" [13]
The plaintiff, a minor, mortgaged his house in favour of the defendant, a money lender, to secure a loan of Rs. 20,000. A part of this amount was actually advanced to him. Subsequently court said that the executed mortgage should be cancelled as was done by a minor.

3. LAWFUL CONSIDERATION OR LAWFUL OBJECT :
All these kinds of consideration are unlawful;
• Is forbidden by law
• Is of such nature that if permitted, it would defeat provisions of any law or is fraudulent
• Involves or implies injury to any person or property or court regards it as immoral or opposed to public policy.[14]
For example; A promises to obtain for B an employment in the public service and B promises to pay 1,00 to A. this contract is void as the consideration is unlawful.
If the contracts have following objectives they are void;
• In restraint of marriage [15]
• In restraint of trade [16]
• In restraint of legal proceedings [17]
• Agreements for uncertainty [18]
• Agreements by way of wager [19]
Hence, it could be inferred that the contract to be valid needs to fulfill three conditions; Free consent, competent parties and lawful consideration and lawful object.

Endnotes
[1] According to section 2(e) of Indian Contract Act, 1872 “every promise and every set of promises, forming consideration for each other, is an agreement”.
[2] AIR 1966 SC 128
[3] Section 15 of Indian Contract Act, 1872
[4] According to section 16 of Indian Contract Act, 1872
[5] Mannu Singh v. Umadat Pande, ILR (1888-90) 12 All 523
[6] Section 17 of Indian Contract Act, 1872
[7] Section 18 of Indian Contract Act, 1872
[8] Section 21 of Indian Contract Act, 1872
[9] Phillips v. Brooks Ltd. (1919) 2 KB 243
[10] Section 11 of Indian Contract Act, 1872
[11] Raj Rani v. Prem Adib AIR 1949 Bom 215
[12] Section 12 of Indian Contract Act, 1872
[13] ILR (1903)30Cal 539 (PC)
[14] Section 23 of Indian Contract Act, 1872
[15] Section 26 of Indian Contract Act, 1872
[16] Section 27 of Indian Contract Act, 1872
[17] Section 28 of Indian Contract Act, 1872
[18] Section 29 of Indian Contract Act, 1872
[19] Section 30 of Indian Contract Act, 1872