A contract is an agreement between two parties creating promises that are enforceable by law. The law governing contracts in India is the Indian Contract Act, 1872.
Section 2(h) defines a contract as “an agreement enforceable by law,”
Section 2(e) defines an agreement as “every promise and every set of promises forming consideration.” To formulate an agreement, one party makes a proposal and the other accepts it. Acceptance of the proposal results in a promise, and the promise results in an agreement.
Although contracts may be oral or written, where the law requires a written
contract, that requirement must be fulfilled.
All contracts are agreements, but not all agreements are contracts.
An agreement becomes a contract only when the essentials under Section 10 are fulfilled.
The essential elements are:
Offer and Acceptance, where one party makes an offer and the other accepts it, either expressly or impliedly. The offer must be communicated and must show willingness to do or abstain from doing something.
Intention to create legal obligations is recognised as an essential through judicial interpretation.
Consideration is necessary, as an agreement without consideration is void under Section 25, subject to recognised exceptions.
The parties must be competent to contract, meaning they must be majors, of sound mind, and not disqualified by law.
Consent must be free and not obtained by coercion, undue influence, fraud, misrepresentation, or mistake.
The object and consideration must be lawful.
The contract must not be expressly declared void under the Indian Contract Act or any other law.
Finally, the terms of the contract must not be vague or uncertain.
When all these essentials are fulfilled simultaneously, a valid contract is
formed.