Essential elements of a valid contract

Essential Elements of a Valid Contract

The following are the essential elements of a valid contract.

Essential elements of a valid contract

Image: Essential elements of a valid contract

1. Offer and Acceptance: Basically, a contract unfolds when an offer by one party is accepted by the other party . The accepted offer should be without any qualification and be definite. An offer needs to be clear, definite, complete and final. It should be communicated to the offeree. A proposal when accepted becomes a promise or agreement. The offer and acceptance must be ‘consensus ad idem’ which means that both the parties must agree on the same thing in the same sense i.e. identity of wills or uniformity of minds.

2. Intention to Create Legal Relationship: The intention of the parties to a contract must be to create a legal relationship between them. Agreements of social nature, as they do not contemplate legal relationship, are not contracts. For instance, if a father fails to give his daughter the promised pocket money, the daughter cannot sue the father, because it was purely a domestic arrangement. Thus, it is clear that all agreements, which do not result in legal relations, are not contracts.

3. Capacity to Contract: If an agreement is entered between parties who are competent enough to contract, then the agreement becomes a contract.

4. Genuine and Free Consent: Free consent is another essential element of a valid contract. An agreement must have been made by free consent of the parties. The contract would be void in case of mutual mistakes. When consent is obtained by unfair means, the contract would be voidable.

5. Lawful Object: Objectives of an agreement should be lawful. It must not be illegal or immoral or opposed to public policy. It is lawful unless it is forbidden by law. When the object of a contract is not lawful, the contract is void.

6. Lawful Consideration: Something in return is Consideration. In every contract, agreement must be supported by consideration. It must be lawful and real.

7. Certainty and Possibility of Performance: The agreements, in which the meaning is uncertain or if the agreement is not capable of being made certain, it is deemed void. T&C of the contract should always be certain and cannot be vague. Any contract that are uncertain are considered void. The terms of the agreement must also be capable of performance and should not enforce impossible act.

8. Legal Formalities: Legal formalities if any required for particular agreement such as registration, writing, they must be followed. Writing is essential in order to effect a sale, lease, mortgage, gift of immovable property etc. Registration is required in such cases and legal formalities in the relevant legislation should be strictly followed.

Leave a Reply




Recent Posts


Related pages


irrevocable letter of credit definitioncharacterstics of managerial economicsretail forecasting methodswhat are the advantages and disadvantages of decentralizationfactory overhead examplespetty cash accountingwage rate varianceunder applied overheadmeaning of drawer and drawee of chequebudgetary control system pptnbfc activitiesgatt objectivesopen systems organizational theorywhat is a quota samplingadvantages and limitations of marginal costingprocess of departmentationvoidable contract in business lawdefinition of autocratic leaderdisadvantages of transfer pricingdrafting official correspondenceresolution for voluntary winding uppresent worth calculationmerger and acquisition examples in indiaconsumer promotions definitionvouchingdifference between forward and future contract with examplestop bussiness mandefinition of préciswhat is the difference between void and voidable contractdefinition of overheadsdisadvantages of mechanizationvalid contract exampleprocess costing system examplesdifference between standard cost and standard costingsdr in bankingverticle mergerratio analysis advantagesbailment and pledge meaninginformal and formal organizationcaveat emptor meanpersonal qualities of an auditorretail method of estimating inventorydefinition retailingdefine correspondencesspeculative buying meaningdefinition debentureagent middlemanadvantages and disadvantages of a franchiseoverhead apportionment methodssole trader featuresmeaning of stock turnover ratioventure capitalism definitionwhat are bills of ladingwhat is free market economy advantages and disadvantagesnominal ledger definitionmeaning of centralization and decentralizationinformal report definitionmeaning of intinerantwhat is an example of a vertical mergeralphabetical order filingbusiness law negotiable instrumentscosting method for manufacturingthe advantages and disadvantages of capitalismspecimen of audit reportmaterial alteration in chequeadvantages and disadvantages of npv and irrwhat is formal organization and informal organizationmercantile law notese commerce benefits and drawbacksdefinition of an autocratic leaderretail forecasting methodsadvantages of cash flow statementnon cumulative preferred sharesbailee formfutures advantages and disadvantages