Essential Elements Of Valid Contract

1) Offer and acceptance

2) Intention to create legal relationship
3) Lawful consideration
4) Capacity of parties
5) Free and genuine consent
6) Lawful object
7) Agreement not declared void
8) Certainty and possibility of
performance
9) Legal formalities
 Offer and Acceptance
Person making an offer is called as offeror,
proposer, or promisor.
Person to whom offer is made is called as
offeree or promisee.
Offer is a proposal by one party to another to
enter into a legally binding agreement with
the offeror.
Eg : A says to B, will you purchase my car for
Rs. 50,000?
A in this case is making an offer to B as he
signifies to B his willingness to sell his car to B
for Rs. 50,000 after obtaining Bs consent.
 How is an Offer made?

Express words spoken

written
Eg :
P advertises in the newspaper
offering Rs. 10,000 to anyone who
returns his lost dog.
A says to B will you purchase my
house at Mumbai for Rs. 70 lakhs.
There is an express offer.
When an offer is made to the world at large
then it is called as General Offer.
Carlill vs Carbolic Smoke Ball Co. (1893)
Offer can be made to a definite person or
when an offer is made to the world at
large it is called as a General Offer.

Offer must be such that it should create

legal relationship. A social invitation
even if it is accepted will not create a legal
relationship.
Carlill vs Carbolic Smoke Balls Co.
Company advertised in several newspapers
that a reward of 100 Euros would be
given to any person who contracted
influenza after using the smoke balls
according to its printed direction.
Mrs. Carlill used the smoke balls according
to the directions of the company but but
contracted influenza.
It was held, she could recover the amount
as by using the smoke balls as she had
accepted the offer.
 Aman says to Raju, I will sell you a
car. Aman owns 3 different cars. Is
the offer a definite offer?
 Offer distinguished from:
Declaration of intention or an
announcement
Invitation to make an offer
Newspapers advertisements

OFFER MUST BE COMMUNICATED

(Lalman Vs Gauri Dutt)
 TENDERS??
A invites tenders for supply of
cement. X, Y, Z submit the tenders. A
accepts Ys tender.
Hence , now there there is a binding
contract between A & Y.
 Acceptance
Contract arises from the acceptance
of an offer.
When the offeree signifies his assent
to the offer, the offer is said to be
accepted.
Acceptance may be
Express or
Implied
 Express Offer & Implied
Offer
Express Offer Implied Offer
When it is communicated It is implied when it is to
by words, spoken or be gathered from the
written or by doing some surrounding
required act. circumstances or the
conduct of the parties.
Eg: P makes an offer to
sell his flat to R. R Eg: At auction sale, S is
accepts the offer. the highest bidder. The
auctioneer accepts the
offer by striking the
hammer on the table.
 Who is eligible to accept the offer?

Acceptance of a particular offer

Acceptance of general offer -
(Carlil vs Carbolic Smoke Ball Co.)
 Legal Rules of Acceptance
1. Absolute and Unqualified
2. Communicated to the offeror
3. Given within reasonable time
4. Cannot precede an offer
When is communication of offer and
acceptance complete?
Eg: Ram proposes, by a letter, to sell a
house to Shyam at certain price.
The letter is posted on 10th July. It
reaches to Shyam on 12th July.
The communication of the offer is
complete when Shyam receives the
letter on 12th July.
 Consideration
It is one of the essential elements to
support a contract, Subject to
certain conditions.
Consideration means Something in
return.
Consideration means something which
is of some value in the eye of law
It may be some benefit to the plaintiff
of detriment to the defendant.
Section 2(d) defines Consideration.
Eg: A promises B not to file a suit
Legal rules to Consideration
1. Move at the desire of promisor
2. It may move from promisee to any
other person (Chinnaya vs
Ramayya)
3. May be past, present or future
4. It need not be adequate
5. It must be real and not imaginary
6. It must not be illegal, immoral or
against public policy.
Exceptions to No Consideration No
Contract
Agreement without consideration is
void but subject to the following
Exceptions
Love and affection
Compensation for voluntary services
 Capacity of Parties
The parties who enter into a contract
must have the capacity to do so.
According to section 11 of ICA, 1872
Every person is competent to
contract who
Is age of majority according to law
Is of sound mind
Is not disqualified from contracting
by any law to which he is subject.
 Minority
The first rule of law is that the law
protects minors against their own
inexperience.
The second rule of law is that the law
should not cause unnecessary
hardship to persons who deal with
minors.
 Minors Agreement
The agreement with or by a minor is
VOID AB INITIO and INOPERATIVE.
Eg : Minor mortgaged his house with a
money lender against a secured loan
for Rs 20,000 out of which the
money lender i.e. the mortgagee
paid a sum of Rs 8,000.
Subsequently the minor sued for
setting aside the mortgage stating
that he was underage when he
executed the mortgage.
 Mohiri Bibi vs Dharmodas
Ghose(1903) CAL 539
It was held that the mortgage was
Void and therefore it stand cancelled.
The money lenders request for the
repayment of the amount advanced
to the minor as part of consideration
was also rejected.
 Minor can be a promisee or beneficiary .
Incapacity of minor to enter into a contract
means incapacity to bind himself by a
contract.
Eg : M aged 17 years agreed to purchase a
second hand bike for Rs 5,000 from Q. He
paid Rs 200 as advance and agreed to pay
the balance the next day and collect the
bike.
When M came with the balance money the
next day Q told him that he had changed his
mind and offered to return the advance.
In this case Q cannot avoid the contract
though M may, if he likes.
 Persons of Unsound Mind
Lunatics
Idiots
Drunken or intoxicated persons

Agreements entered into with the

above persons is Void.
 Other Persons
Alien enemies
Corporations
Insolvents
Convicts
Foreign Sovereigns staffs
 Consent & Free Consent
Consent means acquiescence or act of
assenting to an offer.
Two or more persons agree upon the
same thing.
Free Consent Consent is said to be free
when it is NOT caused by
Coercion (Section 15)
Undue Influence (Section 16)
Fraud (Section 17)
Misrepresentation (Section 18)
Mistake (Subject to Section 20,21,22 read
with Section 14)
 Coercion
When a person is compelled to enter
into a contract by the use of force by
other party or under a threat then it
amounts to coercion.
Coercion includes fear, physical
compulsion and menace to goods.
Eg: A threatens to shoot B if he(B)
does not release him(A) from a debt
which A owes to B. B releases A
under threat. This release is not
voluntary but under coercion.
 Undue Influence
One party compelled to enter into an
agreement against his will as a result of
unfair persuasion by other party.
One party dominates the will of other party.
Eg: Relation of master and servant or
doctor or patient.
Eg: A spiritual guru induced his devotee to
gift to himthe whole of his property in
return of a promise of salvation of the
devotee. Such consent given by devotee is
under undue influence.
 Misrepresentation & Fraud
A representation when wrongly made with
respect to a ,material fact either innocently
or intentionally, is a misrepresentation.
Misrepresentation is not only mis
statements of facts but also includes
suppression of material facts.
Fraud- A false representation made
knowingly or without belief in its truth or
recklessly not caring whether it is true or
not and the maker of such false
representation made the other party to act
upon it will amount to fraud.
 Mistake
Mistake can be 1. Mistake of law of
the country
2. Mistake of law of foreign country
3. Mistake of fact

1)Unilateral mistake 2) Bilateral

mistake
Mistake of law is no excuse.
 Void Agreements & Void
Contracts
Void Agreements - Certain Agreements
have been expressly declared to be void
by the Indian Contract Act.
Void Contracts A contingent contract to
do or not to do something on the
happening of an event becomes void
when the event becomes impossible. A
contingent contract is a contract to do or
not to do something, it depends upon the
happening or not happening of the event.
 When a contract becomes void , the
party who has received the benefit ,
must restore it to the other party or
must compensate.
Eg: A contracts with B a sum of
money when B marries E. E dies
without being married to B. The
contract becomes Void.