Essentials of a valid contract; contract; offer and acceptance; consideration; capacity of parties; free consent; lawful object; void agreements; wagering agreements; quasi contracts.

1. ESSENTIALS
OF A
VALID
CONTRACT

2. A CONTRACT HAS BEEN
DEFINED IN SECTION 2(H)
AS ‘AN AGREEMENT
ENFORCEABLE BY LAW.’

3. ESSENTIALS OF A VALID
CONTRACT
 According to sec. 10, all agreements are
contracts if they are made –
1. Offer & Acceptance
2. Lawful Consideration
3. Capacity Of Parties
4. Free Consent
5. Lawful Object
6. Intention To Create legal Relations
7. Writing & Registration
8. Certainty
9. Possibility Of Performance
10. Not Expressly Declared Void

4. OFFER &
ACCEPTANCE
• OFFER
When one person
signifies to another
his willingness :
 to do or abstain
from doing
anything.
 with a view to
obtain the assent
of that other
 he is said to make
a proposal.
 ACCEPTANCE
When the person,
 to whom the
proposal is made,
 signifies his assent
thereto,
 the proposal is said
to be accepted.

5.  Consideration is the price agreed to be paid
by the promisee for the obligation of the
promisor. The law supplies no means nor
affords any remedy to compel the
performance of the promise made without
consideration. Thus it is a general rule,
“NO CONSIDERATION , NO CONTRACT”

6. An essential ingredient of a valid contract is that the
contracting parties must be COMPETENT TO
CONTRACT sec.11 lays down that-”Every person
is competent to contract who is –
Of age of majority acc. to law
Is of Sound mind
Is not Disqualified from contracting by law

7. INCOMPETENT
PERSONSMINOR- Acc. To sec.3 of the majority
Act,1875,as amended by the Majority
Act,1999,a person domiciled in India who is
under 18 years of age is a minor.Thus
agreements entered into by a minor are
VOID-AB- INITIO.
UNSOUND MIND-A person is said to be of
unsound mind for the purpose of making a
contract, if at the time when he makes it, he
is incapable of understanding it and forming a
rational judgment as to its effects upon his
interests.Thus agreements entered by him
are VOID

8. DISQUALIFIED PERSONS-As per
section11,these are those who are
Disqualified from contracting by any law to
which they are subject, thus:-
Alien enemies
Foreign ambassadors
Convict
Insolvent
Joint stock company

9. CONSENT – Two or more persons are said to
consent when they agree upon the same thing in
the same sense. Thus consent involves identity of
minds or consensus ad-idem.
Free Consent defined sec.14 lays down that
‘Consent is said to be free’ when it is not caused
by:
 Coercion (sec.15)
 Undue influence (sec.16)
 Misrepresentation (sec.18)
 Fraud (sec.17)
 Mistake (sec.20,21&22)

10.  In the absence of ‘Free Consent’ the contract may turn
out to be either voidable or void depending upon the
nature of the flaw in consent , when consent to an
agreement is caused by coercion, undue influence,
misrepresentation or fraud, there is no free consent
and the contract is voidable at the option of aggrieved
party (secs.19 and 19A). But when consent is caused by
‘bilateral mistake’ as to a matter of fact essential to the
agreement ,the agreement is void(sec.20). In such a
case there is ‘no consent’ at all.

11. The object for which the agreement has been entered
into must not be fraudulent or illegal or immoral or
opposed to public injury to policy or must not imply the
person or property of another .

13. According to Indian contract act, a
contract may be oral or in writing BUT in
certain special cases it lays down that the
agreement to be valid,must be in writing and
registered
For eg:an agreement to pay a time barred
debt must be in writing (sec.25)

14. Section 29 of the contract act provides that
“Agreements , the meaning of which is not certain or
capable of being made certain , are void”
The terms of the agreement must not be vague or
uncertain to make it a valid contract . It must be
Possible to ascertain the meaning of the agreement ,
, for otherwise , it cannot be enforced…..

15. Section 56 lays down that
“Agreement to do an act impossible in itself
is void” . If the act is impossible in itself ,
physically or legally , the agreement cannot
be enforced at law…
eg : A, agrees with B to discover
treasure by magic . The agreement is not
enforceable and hence it is void………..

16. The agreement must not have been expressly
declared to be void under act. Section 24-30
Specify certain types of agreements which have
been expressly declared to be void.
For eg: an Agreement in restraint of marriage ,
an agreement in restraint of trade etc……

17. VOID
AGREEMENTS

18. An agreement not enforceable by law is
void [section 2(g)].
Such an agreement does not give rise to
legal consequences and is thus void-ab-
initio.

19. Agreement in restraint of marriage
Agreement in restraint of trade
Agreement in restraint of legal
proceedings
Uncertain agreement
Wagering agreement
Agreement contingent on
impossible events
Agreement to do impossible acts

20. AGREEMENT IN RESTRAIN OF
MARRIAGE…

21. Section 26 says, every agreement in
restraint of the marriage of any person,
other than a minor is void.”

22. AGREEMENT IN RESTRAIN OF
TRADE…

23. An agreement that interferes with a
person’s right to engage him in a lawful
business, trade, occupation or profession
is called an agreement in restraint of
trade. “ Every agreement by which any
one is restrained from exercising a lawful
profession, trade or business of any kind,
is to that extent is void” (sec.27)

24. When a seller of goodwill agrees with the buyer to refrain
from carrying on a similar business within specified local
limits, shall be valid provided the limits are reasonable.

25. • A partner shall not carry on any business other than that
of the firm while he is a partner.
• A retiring partner may make an agreement with his
partners that he will not carry on similar business to that
of the firm within a specified period or specified local
limits.
• Any partner may, upon the sale of the goodwill of the
firm, make an agreement with the buyer that such
partner will not carry on any business similar to that of
the firm within specified period or specified local limits.
• Partners may, upon or in anticipation of the dissolution
of the firm, make an agreement that some or all of them
will not carry on a business similar to that of the firm
within specified period or specified local limits.

26. TRADE COMBINATIONS:
Agreements among businessmen to
reduce cost and enhance profit by
regulating prices, output,
advertising and other factors, are
valid. But combinations which are
against the public interest are void.

27. SERVICE CONTRACT:
A person while in service with
another may be prevented from
accepting other jobs according to
the terms of a service.

28. UNCERTAIN AGREEMENTS

29. • Agreements by the meaning of which is
not certain, or capable of being made certain,
are void. (Sec 29)

30. AGREEMENT IN
RESTRAIN OF LEGAL
PROCEEDINGS…

31. Section 28 declares the following three kinds of
agreements void:
1. An agreement by which a party is restricted
absolutely from taking usual legal proceedings, in
respect of any rights arising from a contract.
2. An agreement which limits the time within which one
may enforce his contract rights, without regard to
the time allowed by the Limitation Act.
3. An agreement which provides for forfeiture of any
rights arising from the contract.

32. Restriction on Legal Proceedings
• An agreement which restrains a person from enforcing
his legal rights, is void. It must be noted, however that
the restriction must be absolute.
• EXAMPLE: ‘A’ borrowed Rs.5000 from ‘B’, a
moneylender. It was agreed between the parties that ‘A’
would repay the loan within one year. And if the amount
was not repaid, B would not take ant legal action against
him. This agreement is void as it prevents B from
enforcing his legal rights.

33. In this connection, the following points must also be kept in mind:
(1)The section shall not render illegal a contract by which two or
more persons agree that any dispute which may arise between
them in respect of any subject or class of subjects shall be
referred to arbitration, and that only the amount awarded in
such arbitration shall be recoverable in respect of the dispute so
referred.(exceptions 1 and 2 to Sec 28)
(2) This section shall not render illegal any contract in writing by
which two or more persons agree to refer to arbitration by
question between them which has already arisen.
(3) An agreement will be valid if it restricts the right of either party
to sue in a particular Court or refer the dispute to
arbitration.(A. Milton & Co. vs. Ojha Automobile Engineering Co.)
(4) The section does not affect an agreement whereby parties agree
not to file an appeal in a higher court.(Kedar Nath vs. Sita Ram)

34. CURTAILING THE PERIOD OF
LIMITATION
An agreement which reduces the limitation period
than that prescribed by the law of limitation, is
void.
EXAMPLE: according to the Indian Limitation Act, an
act for breach of contract may be brought within
three years from the date of breach. If an
agreement provides that no action should be
brought after 2 years, is void as it curtails the
period of limitation.
(Rama Murthy vs. Goppayya)

35. AGREEMENTS
CONTINGENT ON
IMPOSSIBLE EVENTS

36. "Contingent agreements to do or not to do
anything, if an impossible event happens, are
void, whether the impossibility of the event is
known or not to the parties to the agreement
at the time when it is made." (sec. 36)
EXAMPLE :(a) A agrees to pay B Rs. 1,000 as a
loan if two straight lines should enclose a space.
The agreement is void.
(b) A agrees to pay B Rs. 1,000 (as a loan) if B
will marry A's daughter, C. C was dead at the
time of the agreement. The agreement is void.

37. AGREEMENT TO DO
IMPOSSIBLE ACT

38. An agreement to do an act impossible in itself is void.
Contract to do act afterwards becoming impossible or
unlawful: A contract to do an act which, after the contract
is made, becomes impossible or, by reason of some event
which the promisor could not prevent, unlawful, becomes
void when the act becomes impossible or unlawful.
• EXAPLE: a) A agrees with B to discover treasure by magic.
The agreement is void.
• (b) A and B contract to marry each other. Before the time
fixed for the marriage, A goes mad. The contract becomes
void.
• (c) A contracts to marry B, being already married to C, and
being forbidden by the law to which he is subject to
practice polygamy. A must make compensation to B for the
loss caused to her by the non-performance of his promise.

39. WAGERING AGREEMENT…

40. • Literally the word ‘wager’ means a ‘bet’.
EXAMPLE: A and B mutually agree that if it
rains today A will pay B Rs.100 and if it does
not B will pay A Rs.100 .
• It is essential to a wagering contract that each
party under it may either win or lose. If either of
the parties may win but cannot lose, or may
lose but cannot win, it is not a wagering
contract.

41. • There must be a promise to pay money or
money’s worth.
• The promise must be conditional on an event
happening or not happening.
• The event must be an uncertain one.
• Each party must stand to win or lose under the
terms of agreement.
• No party should have a proprietary interest in the
event. The stake must be the only interest which
the parties have in the agreement.

42. Agreements by way of wager, void
Section 30 lays down that “agreements by
way of wager are void; and no suit shall be
brought for recovering anything alleged to
be won on any wager, or entrusted to any
person to abide the result of any game or
other uncertain event on which any wager
is made.”

43. Example:
Where C and D enter into a
wagering agreement and each
deposits Rs. 100 with Z instructing
him to pay or give the total sum to
the winner, no suit can be brought
by the winner for recovering the
bet amount from Z, the
stakeholder. Further if Z had paid
the sum to the winner, the loser
cannot bring a suit, for recovering
his Rs.100, either against the
winner or against Z even if Z had
paid after loser’s definite
instructions not to pay.

45. • Agreements for sale and purchase of
any commodity or share market
transactions in which there is a genuine
intention to do legitimate business are
not wagering agreements.
• “In order to constitute a wagering
contract, neither party should intend to
perform the contract itself, but only to
pay the differences.”

46. • A lottery is a game of chance and hence is
a wagering transaction.
• It is not only void but also illegal because
Section 294-A of the I.P.C declares
‘conducting of lottery’ a punishable offence.
EXCEPTION: If a lottery is authorized by the
government, the only effect is that the
persons conducting the lottery will not be
guilty of a criminal offence, but it will remain
a wager alright.

47. • Crossword puzzles in which prizes depend
upon correspondence of the competitor’s
solution with a previously prepared solution
is a wager.
• But if the prizes depend upon skill and
intelligence then it is a valid transaction.
Hence prize competitions which are a game
of skill and in which effort is made to select the
best competitor are not wagers. However
amount prize in such competitions should not
exceed Rs.1000.

48. • Valid contracts even though they provide for payment of money
by the insurer on the happening of a future uncertain event.
They differ from wagering agreements in 3 aspects:
INSURANCE CONTRACTS WAGERING AGREEMENTS
Holder must have an insurable
interest in the event. Thus these
contracts are entered into to
protect an interest.
There is no interest to protect and
the parties bet exclusively to make
easy money.
Based on scientific and actuarial
calculation of risks.
They are a gamble without any
scientific calculation of risks.
They are regarded as beneficial to
the public.
They don’t serve any useful
purpose.

49. MEANING….

50. A quasi-contract (or implied-in-law contract or constructive
contract) is a fictional contract created by courts for equitable,
not contractual, purposes. A quasi-contract is not an actual
contract, but is a legal substitute formed to impose equity
between two parties. A contract is the result of an agreement
between two parties but in some cases , there is no offer ,no
acceptance , no consensus-ad-idem but the court says that there
is a contract between the two. Such contracts imposed by law are
known as quasi or constructive or certain relations resembling
those created by a contract.Such contracts are based on the
“doctrine of unjust enrichment” that is a person shall not be
allowed to enrich himself unjustly at the expense of another.

58. CONDITIONS
• THE PLAINTIFF SHOULD BE INTERESTED IN
MAKING THE PAYMENT IN ORDER TO PROTECT
HIS OWN INTEREST AND PAYMENT SHOULD NOT
BE VOLUNTARY ONE.
ILLUSTRATION:A sub-tenant pays the arrears of rent
due by the tenant to the landlord ,in order to
save the tenancy from forfeiture . The sub-tenant
is entitled to recover from the tenant ,the
amount paid by him to the landlord ,although
there is no contract between the two .

59. • The payment must be such as the other party
was bound by law to pay.
LEGAL CASE: ABID HUSSAIN vs GANGA SAHAI
A’s goods were wrongfully attached to realise
the arrears of Government revenue due by B.
A pays the dues to save the goods from being
sold . He is entitled to recover the amount
from B.

60. • The payment must not be as such as the plaintiff
himself bound to pay. He should only be interested in
making the payment that is under this section, suit is
maintainable only for reimbursement and not for
contribution.
ILLUSTRATION:
A and B have been jointly Rs.500 for selling
adulterated oil. A alone pays the amount of fine in
good faith. A cannot later claim contribution from B
under section 69 although B was bound by law to pay
and A has paid B’s share in good faith, yet A cannot
recover as he himself was bound to make the payment,
being jointly liable with B and was not simply
interested in making the payment.

61. 3.OBLIGATION OF PERSON ENJOYING
BENEFIT OF NON-GRATUITOUS ACT
ILLUSTRATIONS:
(1) A , a tradesman, leaves goods at B’s house
by mistake. B treats the goods as his own. He
is bound to pay A for them.
(2) A saves B’s property from fire .A is not
entitled to any compensation from B if the
circumstances show that he intended to act
gratuitously.

62. RESPONSIBILITY OF FINDER OF GOODS
(SECTION 71)
LEGAL CASE: HOLLINS vs FOWLER
H picked up a diamond on the floor of F’s shop and
handed it over to F to keep it till the owner appeared.
In spite of best efforts the true owner could not be
searched. After the lapse of some weeks tendered to F
the lawful expenses incurred by him for finding the
true owner and an indemnity bond and requested him
to return the diamond to him(H) .F refused to do so.
Held ,F must return the diamond to H as he was
entitled to retain the goods as against everybody
except the true owner.

63. (5)LIABILITY OF A PERSON TO WHOM MONEY IS
PAID ,OR THING IS DELIVERED BY MISTAKE OR
UNDER COERCION
ILLUSTRATION:
(a)A and B jointly owe Rs. 100 to C. A alone pays
the amount to C ,and B ,not knowing this fact,
pays Rs.100 over again to C.C is bound to repay
the amount to B.
(b)A fruit parcel is delivered under a mistake to R
who consumes the fruits thinking them as
birthday present . R must return the parcel or
pay for the fruits . Although there is no
agreement between R and the true owner ,yet he
is bound to pay as the law regards it a quasi
contract.

64. GROUP EFFORTS BY:
• HIMANI GUPTA… 131106
• JASKIRAT KAUR… 131181
• MEGHNA SETHI… 131229
• NAVPREET DHINGRA… 131403
• HARSIMRAN BINDRA…131490
• PUSHPINDER…131473