A Valid Contract and its Essentials

Introduction

In legal terms, a contract is defined under Section 2(h) of the Indian Contract Act as "an agreement enforceable by law." To understand what constitutes a valid contract, we turn to Section 10, which outlines its essential elements. According to Section 2(e), "every promise and every set of promises forming the consideration for each other is an agreement." This foundational framework sets the stage for exploring the intricacies involved in the formation of a contract, highlighting the crucial components that transform a mere agreement into a legally binding contract.

Essentials for a Valid Contract

1. There should be an agreement i.e. offer and acceptance, between the two parties.

2. Parties must be competent to contract

3. There must be consideration.

4. There should be free consent of the parties.

5. There must be a lawful object.

We’ll now understand each term in detail with the help of some case laws.

1. The Agreement: Offer and Acceptance

For a valid agreement, an offer must be communicated to the offeree. An offer is a clear proposal made by one party (the offeror) to another (the offeree), indicating a willingness to enter into a contract on certain terms. Both offer and acceptance can be either expressed or implied:

a. Implied: When implied, the conduct of the parties can substitute for written or spoken words, and their intentions are inferred from their actions.

b. Expressed: When expressed, the offer and acceptance are communicated through spoken or written words.

Acceptance is the unqualified agreement to the terms of the offer, signifying the offeree's consent to form a contract. The communication of a proposal is considered complete once it has been brought to the attention of the person to whom it is made. Acceptance can only occur if the offeree is aware that an offer has been made to them.

Let us now look at some case laws to understand the nuances better.

Haji Mohd. Ishaq v. Mohd. Iqbal

In this case, the plaintiffs supplied certain goods to the defendants. The defendants accepted the goods and paid part of the price. This partial payment created a partial liability. By accepting the goods and making a payment, the defendants' actions demonstrated clear conduct, resulting in an implied contract between the parties.

Lalman Shukla v. Gauri Dutt2

In this case, the defendant's nephew escaped from home. The Defendant's servant (plaintiff) was sent to search the boy, post which the defendant also issued a reward of Rs 501 to anyone who found the boy. Plaintiff, who was ignorant of the reward, was successful in searching for the boy. When he came to know of the reward, which had been announced in his absence, he brought an action against the defendant to recover the money which he claim should be his.

It was held that since the plaintiff was ignorant of the offer of reward, his act of bringing the lost boy did not amount to acceptance.

2. Competency to Contract

Section 10 of the Indian Contract Act stipulates that parties must be competent to enter into a contract. Competency is defined under Section 11, which states that minors, persons of unsound mind, and individuals disqualified by law are not competent to contract. Furthermore, in the context of ratification, consideration provided during minority cannot be deemed valid consideration for a subsequent promise made after attaining majority.

Suraj Narain v. Sukhu Aheer

In the case of Suraj Narain v. Sukhu Aheer, a person borrowed money while he was a minor. Upon reaching the age of majority, he made a new promise to repay the sum plus interest. The question arose as to whether this new promise was supported by valid consideration. It was held that the consideration provided during his minority was not valid for the subsequent promise.

Moreover, the Law of Estoppel does not apply against minors. They are permitted to use their minority as a defense to avoid liability.

Mohori Bibee v. Dharmodas Ghose

In the landmark case of Mohori Bibee v. Dharmodas Ghose, the plaintiff, Dharmodas Ghose, was a minor when he mortgaged his property to the defendant, Brahmo Dutt, through his agent, Kedar Nath, for a loan. The minor subsequently sought to void the mortgage on the grounds of his minority status. The Privy Council held that the mortgage was void since Dharmodas Ghose was not competent to contract under Section 11 of the Indian Contract Act. The ruling emphasized that a contract with a minor is void ab initio (from the beginning) and unenforceable. This case established the principle that minors cannot be bound by contracts, and they can always plead their minority to avoid liability..

Doctrine of Restitution

The Doctrine of Restitution mandates that if a minor obtains an undue benefit, they are required to restore the benefit. However, this obligation is limited to goods and property that remain in the minor's possession.

In the case of Leslie v. Sheill, a minor falsely represented himself as an adult and borrowed money from the plaintiffs. When the plaintiffs sought legal action to recover the loan, it was held that the minor was not liable since the money could not be traced. The court ruled that, under the Doctrine of Restitution, a minor is only required to return what remains in their possession.

3. Consideration

Section 2(d) of the Indian Contract Act, of 1872 defines consideration. Section 25 provides that the agreement without consideration is void.

Lampleigh v. Brathwait 5

Brathwait was found guilty of committing murder. He requested the plaintiff to obtain a pardon from the king. Afterwards, the defendant promised to pay the plaintiff £100 in gratitude It was held that the plaintiff had the right to enforce the promise and get the amount.

This case illustrates the principle that a promise can be enforceable even without initial consideration if it is made after the performance of an act that was requested by the promisor. It underscores the concept that past consideration, if requested and subsequent to the promise, can be sufficient to support a contractual obligation.

4. Free consent

It is defined under section 14 of the Indian Contract Act. Meeting of the minds is a must. A contract is voidable when the consent of the party is given by Coercion, Undue Influence, Fraud, or misrepresentation. Agreement is void when consent is given by mistake.

Takri Devi v. Rama Dogra6

In this case, an old illiterate lady gifted her property to her lawyer. It was held that it was a fiduciary relationship. The lawyer was in a position to dominate the will of the lady. And it was recognized as a case of undue influence.

5. Legality of Object

Section 23 of the act provides what considerations and objects are lawful, and what are not. Considerations and objects are unlawful when they are forbidden by law, defeat the provisions of any law, have a fraudulent purpose, are injurious to a person, are immoral or are opposed to public policy.

Cowan v. Milbourn

In the case of Cowan v. Milbourn, the plaintiff leased land for a meeting, unaware that the purpose of the meeting was irreligious. Upon discovering the nature of the meeting, the defendant refused to provide the land. The court held that the agreement was illegal and therefore did not meet the essential requirements of a valid contract. This ruling was based on the principle that contracts with illegal objectives or considerations are void ab initio and cannot be enforced by law.

Conclusion

These were the essentials for a valid contract without which the contract is void. Void agreements are those which are void from the very beginning. These essentials very well make the difference clear between void and voidable agreements. So, if we want to make the contract completely valid, there should not be the space of waiting for the other party. Rather it must be without coercion, undue influence, misrepresentation, fraud etc.

References

{1} (1978) 2 SCC 493

{2} (1913) 11 All Lj 489

{3} A.I.R. 1928 All. 440

{4} (1903) 30 I.A. 114 (P.C.)

{5} (1615) Hob. 105

{6} A.I.R 1984, H. P. 11.

{7}https://www.indiacode.nic.in/bitstream/123456789/2187/2/A187209.pdf