05-05-2012, 12:20 PM
Essential elements of valid contract
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FEATURES OF AN AGREEMENT:
1. Plurality of the parties
2. Consensus – ad-idem
3. Legal obligation
1. Plurality of the parties; for every agreement, there should be minimum two parties because one person alone cannot enter into an agreement with himself.
2. Consensus – ad-idem; the minds of both the parties must be in ad-idem, i.e., both the parties must think of the same subject matter the same time and in the same sense.
3. Legal obligation; an agreement, to become a valid contract, it should end in legal relations. Agreements without legal obligation will not be able to construct a contract. These agreements are purely domestic arrangements.
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For EX. Agreement between husband and wife, father and daughter, etc.), they will not be able to form any legal obligation between the parties.
BALFOWR (Vs) BALFOUR - 1919
Point Decided is – A husband promised to pay his wife a household allowance of £30 every month. Later the parties separated and the husband failed to pay the amount. The wife sued for the allowance.Held, agreements such as these were outside the realm of contract altogether.
“ All contracts are agreements but all agreements are not contr4act only those we agreements which result in legal obligations can become valid contracts An agreement to become a valid contract, it must fulfill to essential elements of a valid contract according to sec 10 of ICA, 1872.
Essential Elements of a Valid Contract:
• Offer and acceptance
• Legal relationship
• Consensus – ad-idem
• Free consent.
• Capacity or competency of parties
• Lawful object
• Lawful consideration
• Certainty and possibility of performance
• Agreements not declared to be void
• Legal formalities
1. Offer and Acceptance; In order to create a valid contract, there must be an agreement between tow parties. An agreement involves a valid offer by one party and valid acceptance of the same by the other party.
The most important aspect of a valid proposal is that it should be voluntary. It should not be an answer to a question or a replay to an enquiry and it should be communicated.
CASE: HARVEY (vs.) FACEY.
The most important aspect of a valid acceptance is that it should be given by the promise only but not by any body else. So an acceptance given by a third party will not create a promise.
CASE: BOULTON (vs.) JONES.
2. Legal relationship; the parties must intend their agreement to result in legal relations. This means that the parties must intend that if one of them falls to perform his promise, he shall be answerable for that failure in law the lending case on this point is
Rose and Frank Co. vs. Cromption Bros (1925)
Point decided is – Two firms entered into a written contract for the sell and purchase of tissue paper the agreement contained a clause to the effect that “this arrangement is not, nor is this memorandum written, goods were not delivered, the buyers brought an action for non-delivery. It was held that there is no contract as the parties never intended to create leglrealationship.
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3. Consensus-ad-idem; the minds of both the parties must be ad-idem. In other words, the tow parties must have agreed about the subject matter of the contract at the same time and in the same sense.
EX: A, who owns two horses named Rajhans and Hansraj, is selling horse Rajhans to B.B thinks he is purchasing horse Hansraj.There fore no consensus ad idem and consequently no contract.
4. Free Consent (Permission or Willingness); an agreement must have been made by free consent of the parties. Consent may not be free either on account of mistake in the minds of the parties or an account of the consent being obtained by some unfair means like coercion, fraud, misrepresentation or undue influence. In case of mutual mistakes, the contract would be void, while in case the consent is obtained by unfair means, the contract would be void able.
CASE: RANGANAYAKAMA (vs.) ALWAR CHETTY
5. Competency of parties: The parties to the agreement must be competent to contract. If either of the parties to the contract is not competent to contract the contract is not void. According to sec11, following are the persons who are competent to contract.
a) Who are of the age of majority according to the law to which they are subject?
b) Who are of sound mind
c) Who are not disqualified from contracting by any law to which they are subject?
6. Lawful object; the object of an agreement must be lawful. Object has nothing to do with consideration. It means the purpose or design of the contract. Thus, when one hires a house for sue as a gambling house; the object of the contract is to run a gambling house. The object of the contract is to run a gambling house. The object is said to be unlawful if-
a) It is forbidden by law,
b) It is of such nature that if permitted it would defeat the provision of any law,
c) It is fraudulent.
d) It involves an injury to the person for property of any other;
e) The court regards it as immoral and opposed to public policy.
7. Law full consideration; All contracts must be supported by consideration. Gratuitous promises are not enforceable by law. An agreement made for an unlawful consideration is void. Lawful consideration requires both, the presence of consideration and the lawfulness of consideration.
• The consideration may be past, present, or future.
• Consideration must be real.
• The consideration should also be real.