ANkit.pptx

8/14/2019 ANkit.pptx

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ESSENTIALS OF A VALIDCONTRACT

By: Ankit Chawla (1211310007)

Alisha (1211310004)


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As per Section 10 of Indian Contract Ac

All agreements are contracts if they are made by the free parties, competent to contract for a lawful consideration anobject and not here by expressly declared to be void.

As per this definition following are he essential elements for a va


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1. PROPOSAL AND ACCEPTANCE

For the formation of a valid contract it is necessary that onmake the offer and the other party should accept it, as acceptance contract will come into existence.

Proposal: As per Section 2 (a) of Indian Contract Act, wsignifies to another his willingness to do or abstain from do

with a view to obtain the assent of that other to such act or ais said to make a proposal.


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Essential Elements of Proposal

There must be two parties

Willingness to do or not to do something

Should be a proposal, not merely an intention to make proposal


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Legal Rules as to Proposal

The offer must be made to create legal obligation.

The terms of proposal must be certain not vague.

Proposal can be general or specific. (Case: MCarliee Vs Carbolic Smoke Ball Company)

Proposal may be expressed or implied.

Proposal must be in the form of a request and not

order.

The offer must be communicated.

Proposal must be for possible act.


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Case: Mrs. Carliee Vs Carbolic Smoke Ball Compa

In this case the Carbolic Smoke Ball Co gave advertisement in the newspaper, offering influeafter using their smoke ball 3 times daily for 2 week

Believing on the advertisement Mrs. Carliee used same, but contracted influenza .

Mrs. Carliee sued the company and claimed 100

Judgment was in the favor of Mrs. Carliee.


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Acceptance

According to Section 2 (h): when the person to whom the offer is msignifies his assent thereto, the offer is said to be accepted.


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Essentials for a Valid Acceptance

Acceptance must be made by the person to whom the offer is mad

Acceptance must be in the prescribed manner Sec 7(2)

For example: If the offerer wants the acceptance by e-mail, theacceptance must be given via e-mail.

Similarly if any limit is fixed by the offerer for acceptance, thenacceptance must be given with in the specified time.

Rejected offers cannot be accepted until it is renewed: It is a gerule that an offer once rejected cannot be accepted, untipresented again.


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2. Intention to Create Legal Obligation

There must be an intention among the parties to create legal obliga

If the intention of the parties is not to create legal obligation, then only remain an agreement and cannot be a valid contract.


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3. Competency or Contractual Capacity of the

Parties

According to Section 10 of Indian Contract Act: All those agreem

can be enforced by law, which are made by the person hcontractual capacity.

According to Section 11: Everyperson is competent to contract wof the age of majority according to the law of which he is subjetwho is of sound mind and is not disqualified from contracting by anto which he is subject.

As per above definition, following parties are incompetent to contra

Minors

Persons of unsound Mind

Persons disqualified by law to which they are subject.


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MINOR

Minor is a person who has not attained the age of Majority accordinthe law of his country.

According to Section 3 of Indian Majority Act: Aminor is a person has not completed eighteen years of age.


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Rules Regarding Contract with a Minor

An agreement with or by a minor is void a

inoperative ab-initio.Contract for Necessities of Life: As per Sec 68 of Ind

Contract Act, if a person enters into a contractnecessities of life, then the person supplying sunecessities have the right to reimburse the amofrom the property of minor. The necessities basic

include food, clothing, rent of house, educatioexpenditure etc.

MinorsContract for his Benefit (can be enforced)


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Contract by parents or guardian of the minor: Ifminors parents or guardian make a contract the behalf of the minor and for his benefit, th

such contracts are treated as valid. But if they eninto a contract for the employment of a minor, thsuch a contract will be invalid.

Minors contracts cannot be ratified on becoming major.

Minor as an Agent: According to Sec 182 of IndiContract Act, Anagent is a person employed do an act for another or represents another dealing with the third party.


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Minor as a partner: As per Sec 30 of Indian Partnership Act, A minobe admitted as a partner, but such a partner will only share the prothe losses, i.e. he cannot be held liable to share the loss.

Liability for Minor for Torts: If a minor gets indulge in a crime sucmurder, then he/she can be held liable just like adults.

Minor cannot be adjudged Insolvent: A minor cannot be adjuinsolvent because due to his incompetency, he cannot be decinsolvent


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Persons of Unsound Mind

According to Sec 11, A person of unsound mind is incontract

According to Section 12 A person is said to be of sounpurpose of making a contract, if at the time when he mcapable of understanding it and forming a rational judgeffects upon his interests


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Types of Persons ofUnsound Mind

IDIOT LUNATIC DRUNKEN SENIPERSO


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4. LAWFUL CONSIDERATION

Consideration means Somethingfor Something

Consideration is the price for which the promise of other is bought apromise given for a lawful value is enforceable.

As per Section 25 of Indian Contract Act, An agreement witconsideration is void.


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Essential Elements of Consideratio

Consideration must move at the desire of the promisor: one of theimportant elements of consideration is that any promise to do some

must be according to the desire of the promisor. If any act is done voluntarily by the promisee such act will not be t

as consideration.

Consideration may be a promise to do or to abstain from dsomething. (Positive nad negative consideration)


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Consideration must be legal: According to Sec 23, For the validitya contract it is necessary that the consideration must be legal.

Contracts based on illegal consideration are considered void.

The consideration is not considered valid or it is considered unlawful if:

It is forbidden by law

It involves any injury to a person

It is against public policy


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5. LAWFUL OBJECT

An agreement can be enforceable by law only when its objectlawful.

If the agreement is having unlawful object, then no legal contract between the parties.

According to Section 23, If the object is unlawful for the reamentioned under then the agreement shall be void:

The object of a contract is forbidden by law.

If it involves injury to the person or property of another.

If the court regard it as immoral or opposed to public policy.


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6. POSSIBILITY OF PERFORMANCE

An essential of a valid contract is that it must be capable of p

According to Section 56 of Indian Contract Act, Anagreeimpossible act is void ab-initio.

There may be two situations, one in which the act is compleand other situation may be in which the parties are not awact is impossible.


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7. COMMUNICATION OF THE CONTRACT

Both the parties as per Sec 4 of Indian Contract Act, mcommunicate to each other about the offer and acceptance, o

then it will be considered as a valid contract.


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8. FREE CONSENT OF PARTIES

As per Sec 10 of Indian Contract Act, it is important that the consof the parties of a contract must be free.

According to Section 13 of Indian contract Act, Two or m

persons are said to consent when they agree upon the same thingthe same sense.

From the analysis of this definition it is clear that consent is sbetween two parties, when:

Two or more persons in a contract agree upon a thing in a contrac

They agree upon the same thing in the same sense.


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This is also called identity of mind. In English law it is called consead-idem.

If the parties to be contracted do not agree upon the same thing no contract arises at all.

According to Section 14 of Indian Contract Act, consent is said tfree when it is not caused by:

Coercion (Sec 15)

Undue Influence (Sec 16)

Fraud ( Sec 17)

Misrepresentation (Sec 18)

Mistakes (Sec 20 to 22)


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9. Agreements Expressly Declared As Vo

Some agreements are expressly declared as Void from the side of la

agreements are void-ab-initio, such as:

Agreements made by Incompetent Parties.

Agreements made under Mutual Mistake of Facts.

Agreements with Unlawful Consideration and Object

Agreements without Consideration

Agreements in Restraint of Marriage


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Agreements in Restraint of Trade

Exceptions:

Sale of Goodwill

Restraint on Partner

In case of Separation from partnership

On sale of Goodwill of the firm

Trade combinations

Agreements of Service

Agreements in Restraint of Legal Proceedings

Agreements by way of wager or wagering Agreements.

Agreements to do Impossible Acts.


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10. Legal Formalities- Written andRegistered

Contracts related to negotiable Instruments.

Contracts of lease, mortgage etc.

MOA, AOA

Insurance etc

Documents

ANkit.pptx