Contract&

Its Essential Elements

A Presentation for

Teaching Assignment

Prepared By…

Satendra Kumar SharmaLL.M. 4th Semester

School of Legal Studies and Research

Noida International University

Gautam Buddh Nagar, Uttar Pradesh.

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Meaning of Contract(Indian Contract Act, 1872)

“An agreement enforceable by law is a contract.”Section 2(h)

Features of Section 2(h)• Agreement [ Section 2(e) ]

• Enforceability of Law (Section 10)

Essential Elements of a Contract

• Agreement between two parties

• Intention to create legal relationship

• Contractual capacity• Free consent• Lawful consideration

These points shall be discussed in latter slides….

• Lawful Object• Certainty of Terms• Possibility of

performance• Agreement should not

be declared void• Legal Formalities

Features of the Definition of Contract given under Section 2(h)

• Agreement [ Section 2(e) ]

• Enforceability of Law (Section 10)

Agreement [ Section 2 (a) ] Enforceability of Law (Section 10)

• Every promise and every set of promises, forming the consideration for each other, is an agreement.

[ Section 2 (a) ]

• Enforceability of Law- only those agreements can be enforced by Law, which fall within the scope of Section 10.

Features of Section 2(a)• Promise [Section 2 (b)]

• Consideration [Section 2(d) and 25]

Features of the Definition given under Section 2(e)

• Promise [Section 2 (b)]

• Consideration [Section 2(d) and 25]

Promise & Consideration

• Promise-When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. [Section 2 (b)]

• Consideration- When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such Act or abstinence or promise is called a consideration for the promise. [Section 2(d)]

Features of the Sections given above• Proposal [Section 2 (a)]• Promisor [Section 2 (c)]• Promisee [Section 2 (c)]

Proposal, Promisor & Promisee

• When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal.

[Section 2 (a)]

• The person making the proposal is called the “promisor” and the person accepting the proposal is called the “promisee”. [Section 2 (c)]

Proper Sequence of Various Definitions Forming Contract

• Proposal [Section 2(a)]- When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtain the assent of that other to such act or abstinence, he is said to make a proposal.

• Promise [Section 2(b)]- When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

• Promisor & Promisee [Section 2(c)]- The person making the proposal is called the promisor and the person accepting the proposal is called the promisee.

• Consideration [Section 2(d)]- When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such Act or abstinence or promise is called a consideration for the promise.

What agreements are contractsEssential Elements of a Contract

• All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in India and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

(Section 10)

Essential Elements of a ContractWhat agreements are contracts

Participation of the Definition

• All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in India and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

(Section 10)

Essential Elements of a Contract

• Agreement between two parties

• Intention to create legal relationship

• Contractual capacity• Free consent• Lawful consideration

• Lawful Object• Certainty of Terms• Possibility of

performance• Agreement should not

be declared void• Legal Formalities

Agreement Between Two Parties

• An agreement is the essence of the contract. It is the result of offer and acceptance between two parties or more parties.

Example

A propose to sell his car to B for Rs. 10 lakh and B gives his consent to purchase the car for 10 lakh. This is an agreement between A and B.

Intention to create legal relationship

• The intention of both the parties entering into an agreement must be to create legal relationship between them.

If there is no intention on the part of the parties to create legal relationship, there is no contract. Social and moral agreements between the parties cannot be contract.

Balfour v. Balfour

Contractual Capacity Who are competent to contract?

• Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

• Major (18 or 21 years)• Sound mind (capable of understanding)

unsound mind-A patient in a lunatic asylum, A sane man

• Not disqualified from contracting by any law to which he is subject

disqualified- minor, idiot

Mohri Bibee v. Dharmodas Ghosh

Free consent

• Consent- Two or more persons are said to consent when they agree upon the same thing in the same sense.

• Free consent- Consent is said to be free when it is not caused by-

coercion, as defined in Section 15, or

undue influence, as defined in Section 16, or

fraud, as defined in Section 17, or

misrepresentation, as defined in Section 18, or

mistake, subject to the provisions of Sections 20, 21 and 22.

Lawful Consideration & Lawful ObjectExamples

• An agreement made without consideration is void.

no consideration- there is no need of consideration where the contract is made on account of natural love and affection between parties, to compensate voluntarily done something, and time barred debt .

• What considerations and objects are lawful and what not- The consideration or object of an agreement is lawful, unless- it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another or; the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.

Lawful Consideration & Lawful ObjectExamples

Consideration• A promises, for no consideration, to give to B Rs. 1, 000. This is a void agreement.

[Section 25 (a)]• A, for natural love and affection, promises to give his son, B, Rs. 1, 000. A puts his

promise to B into writing and registers it. This is a contract. [Section 25 (b)]• A finds B' s purse and gives it to him. B promises to give A Rs. 50. This is a

contract. [Section 25 (c)]• A supports B' s infant son. B promises to pay A' s expenses in so doing. This is a

contract. [Section 25 (d)]

Lawful Consideration & Lawful Object• A promises to obtain for B an employment in the public service, and B promises to

pay 1, 000 rupees to A. The agreement is void, as the consideration for it is unlawful. [Section 23 (f)]

• A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral. [Section 23 (k)]

Certainty of Terms

• The terms and conditions of an agreements must be certain. They must not be uncertain. If the agreement is uncertain, it cannot be enforced. (section 29)

Certainty of TermsExamples

• A agrees to sell to B a hundred tons of oil. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. [Section 29 (a)]

• A agrees to sell to B his white horse for rupees five hundred or rupees one thousand. There is nothing to show which of the two prices was to be given. The agreement is void.

[Section 29 (f)]

Possibility of Performance

• An agreement to do an act impossible in itself is void. (Section 56)

Example

A agrees with B to discover treasure by magic. The agreement is void. [Section 56(b)]

Agreement should not be declared void

• The agreement must not have been expressly declared void by any law in force in the country.

• Agreement in restraint of marriage. (Section 26)• Agreement in restraint of trade. (Section 27)• Agreement in restraint of Legal Proceedings.

(Section 28)• Uncertain agreements. (Section 29)• Wagering agreement. (Section 30)• Agreement to do impossible act. (Section 56)

Legal Formalities

• A contract may be written or unwritten.

(Section 10)

But

there may be some formalities under the law, which must be fulfilled.

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Thank You