Meaning of Contract :
A contract is a voluntary, deliberate, legally-binding agreement between two or more competent parties, which defines the legal obligation and authorities of parties.
According to Pollack :
“Every agreement and promise enforceable by law is a contract”.
According to Sir William Anson :
“A legally binding agreement between two or more persons is one by which rights are acquired by one or more to act or forbearance on the part of others”.
Elements of a Valid Contract :
- Presence of Two or More Parties :
The first essential element of a valid contract is presence of at least two parties to make a contract, one party making the offer and the other party accepting it (offerer and offeree).
To form a contract, there must be an agreement between two parties. To form an agreement, there must be a proposal offer by one party and its acceptance by the other.
- Intention to create legal relationship :
When the two parties enter into an agreement, their intention must be to create legal relationship between them. If there is no such intention on the part of the parties, there is no contract between them. For a valid contract, both the parties to a contract must bear in their mind that they will have some legal rights against each other and if any of them does not fulfill their obligation arising under the contract, then the court will make them fulfill their obligation.
According to Section 10, an agreement becomes a contract if entered into between the parties who are competent to contract. According to Section 11, every person is competent to contract, who is not minor, not of unsound mind and not disqualified by any law which he is subject to.
- Free and genuine consent :
It is essential for the creation of every contract that there must be a free and genuine consent of the parties to the agreement. The consent of the parties is said to be free when they are of the same mind on all the material terms of the contract. This is absent if the agreement is induced by coercion, undue influence, etc.
It means ‘something in return’. The agreement is legally enforceable only when supported by consideration i.e. when both the parties give something and get something in return. Without consideration, a contract becomes void.
The object of the agreement must be lawful. In other words, it must not be illegal, immoral, or opposed to public policies. If an agreement suffers from any legal law, it would not be enforceable by law.
Certainty is an essential element of a contract. The agreement must be certain and not vague or indefinite. If it is vague, it is not possible to ascertain its meaning.
- Possibility of performance :
The terms of agreement must also be such as are capable of performance. An agreement to perform an act impossible in itself cannot be enforced.
- Agreement declared void :
The agreement must not have been expressly declared void by any law enforced in the country.
A contract may be made by words, spoken or written. As regards legal effects, there is no difference between a contract in writing and a contract made by words of mouth.
