Essentials of a valid contract

Let us examine the conditions essential for the validity of a contract.

a)      An offer (proposal) must be made by one party. It must be accepted by the other party. That is Agreement.

b)      There must be genuine consent on the part of the parties.

c)      There must be an intention to create legal relationship and legal consequences.

d)      Both the parties must be competent to contract.

e)      The object of the contract has to be legal. It should not be against public policy.

f)        The agreement has to be supported by consideration and be capable of implementation or performance.

g)      The terms and conditions of the contract shall be certain.

h)      The agreement should not be expressly declared void under the provisions of the Indian Contract Act.

i)        Formalities as required by law in making a contract should be complied with.

 What do the terms “offer” and “acceptance” imply? An offer is a proposal by one person, whereby he expresses his willingness to enter into a contractual obligation in return for a promise, act or forbearance. An offer must be clear, definite, complete and final and not vague. An offer must be communicated to the offeree.            Communication may be oral, written or implied.

Every offer must be clear and definite. This means that the language used in an offer should not be capable of different interpretations. Ambiguity in language should be avoided. Only when the offer is made in clear terms the offeree will be in a position to take a decision as to whether to accept the offer or not. Otherwise he may, instead of accepting it, send a counter offer. An offer has to be communicated to the offeree. Otherwise he cannot take any decision on the offer (because he does not know that there is such offer).

In many cases it may appear that there is consent, but the consent may not be genuine. It may be obtained through force, threat, fraud etc. These are cases where consent is not free. Such situations cut at the root of ‘free consent’.

 What is the meaning of saying “object shall be legal and it should not be against public policy’? A contract between A & B, obliging A to murder C, and B to pay A Rupees Five lakhs on achievement of the object can not be enforced for the simple reason that the object of the contract is illegal. Similarly a contract between A & B wherein A undertakes to pay Rupees 10,000 every month to B if B does not marry and remains a spinster all her life cannot be enforced as it is opposed to public policy. Restrictions on marriage go against public policy.