BABASAHEB BHEEMRAO AMBEDKAR UNIVERSITY

DEPARTMENT OF RURAL MANAGEMENT

TEACHER INCHARGE- Dr. ABHILASH BABU

AJEET KUMAR

ROLL NO- 4460

CONTRACT

According to sec.2(h), a contract is defined as an agreement enforceable by law.

Agreement- According to sec.2(e), every promise or set of promises forming consideration for each other.

Promise- According to sec.2(b), when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted becomes a promise.

ESSENTIALS ELEMENTS OF A VALID CONTRACT

SEC 10

1. Offer & Acceptance Should be Present

At least two parties are needed to enter into a contact. One party has to make an offer and other must accept it.

The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree’ or ‘promisee’. There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement.

2. Intention to create legal relationship

A contract requires that the parties intend to enter into a legally binding agreement. That is, the parties entering into the contract must intend to create legal

relations and must understand that the agreement can be enforced by law.

Case Law: In Balfour V. Balfour, a husband promised to pay maintenance allowance every month to his wife, so long as they remain separate. When he failed to perform this promise, she brought an action to enforce. As it is an agreement of domestic nature, it was held that it does not contemplate to create any legal obligation

3. Free Consent

Consent means knowledge & approval of the parties concerned.

Consent would be considered as free consent if it is not vitiated by coercion, undue influence, fraud, misrepresentation or mistake.

Example:- A threatened to shoot B if he (B) does not lend him Rs 2000 & B agreed to it. Here the agreement is entered into under coercion and hence voidable at the option of B.

4. Lawful consideration

Consideration would generally mean ‘compensation’ for doing or omitting to do an act or deed.

It is also referred to as ‘quid pro quo’ viz ‘something’ in return for another thing. Such a consideration should be a lawful consideration.

Example- A agrees to sell his books to B for Rs 100. B’s promise to pay Rs 100 is the consideration for A’s promise to sell his books & A’s promise to sell the books is the consideration for B’s promise to pay Rs 100.

5. Capacity to Contract

The parties making the contract must be legally competent. Law prohibits :-

1. Minor2. Person of unsound mind (excluding the

Lucid intervals)3. Person who are otherwise disqualified like

an alien enemy, insolvents, convicts, etc from entering into any contract.

6. Legality of Object

The object of the agreement must be lawful. An agreement is unlawful, if it is:-

(i) Illegal (ii) Immoral (iii) Fraudulent (iv) Of a nature that, if permitted, it would

defeat the provisions of any law (v) Causes injury to the person or property of

another(vi) Opposed to public policy.

7. Certainity

The terms of a contract must not be vague or uncertain.

If an agreement is vague and its meaning cannot be ascertained, it cannot be enforced.

8. Possibility of Performance

The terms of a contract must be such as are capable of performance. An agreement to do an impossible act is void and is not enforceable by law.

9. Writing & registration

Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even require registration. Therefore, where law requires an agreement to be put in writing or be registered, the same must be complied with.

For instance, the Indian Trusts Act requires the creation of a trust to be reduced to writing.

THANK YOU