0In order to become a valid contract, an agreement must have the following essential elements:
- There must be an offer and its acceptance: In an agreement there must be an offer by one party and its acceptance by the other. The offer when accepted becomes agreement.
- There must be mutual consent of the parties: The parties to an agreement must have the mutual consent i.e., they must agree upon the same thing and in the same sense. This means that there must be consensus ad idem (i.e., meeting of minds).
Example 1.3: A owned two horses, one black and the other white. He offered to sell one horse to B. While making the offer, A had black horse in mind, but B accepted the offer thinking that it was made for white horse. In this case, no agreement comes into existence as there is no consensus ad idem (i.e., meeting of minds).
- There must be legal obligation: An agreement must create legal obligations i.e., an obligation enforceable by law. If the parties do not intend to create legal obligation, there is no contract between them. An obligation which gives rise to a moral or social obligation only is not a contract e.g., an invitation to a friend for dinner creates a mere social obligation.
Example 1.4: A invited B-to a dinner, and B accepted the invitation. It is merely a social agreement and cannot be enforced in a court of law.
- There must be free consent of the parties: If the consent of the parties is not free, then no valid contract comes into existence. The consent is not free when it is obtained by coercion, undue influence, fraud, misrepresentation of facts and mutual mistake of fact.
Example 1.5: A threatened to shoot B's son unless B signs a promissory note for Rs. 50,000 in favour of A. B signed the promissory note under the threat. In this case, the promissory note is not valid as B's consent is not free being obtained under pressure.
Nature and Kinds of Contracts.
- The parties must be competent to contract: It means that the parties must be capable of entering into a contract. The minors, or persons of unsound mind are not competent to contract. If the parties are not competent to contract, then no valid contract comes into existence.
Example 1.6: A, a minor, borrowed Rs. 1000 from B and agreed to repay it within two months. It is not a valid contract as A is not competent to contract.
- The agreement must be supported by lawful consideration: The lawful consideration is that which is neither fraudulent, forbidden by law, immoral nor opposed to public policy etc. If the consideration is not lawful, then no valid contract comes into existence.
Example 1.7: A promised to obtain an employment for B in a government department, and B promised to pay Rs. 50,000 to A. In this case, the agreement in not valid as the consideration for it is unlawful.
- The object of the agreement must be lawful: A lawful object is that which is neither fraudulent, forbidden by law, immoral, nor opposed to public policy etc.
Example 1.8: A, B and C entered-into an agreement for the division of gains, among them, which is to be acquired by them by fraud. In this case, the agreement is not valid as its object is unlawful.
- The agreement must not be declared to be void: If certain agreement is expressly declared to be void by the law of the country, then such agreement, if entered into, shall not be enforceable by Courts of Law.
- The agreement must be certain: The meaning of the agreement must be certain. In other words, an agreement whose meaning is not certain, is not valid.
Example 1.9: A agreed to sell to B his green LML scooter for Rs. 5,000 or Rs. 7,000. There is nothing to show which of the price is to be paid by B. In this case, the agreement is not valid as it is uncertain.
- The performance must not be impossible: The performance of an agreement must be possible. An agreement to do an impossible act is not valid.
Example 1.10: A agreed with B to discover a treasure by magic. In consideration, B agreed to pay Rs. 5,000 to A. It is not a valid agreement as its performance is impossible.
