8 Essential Elements of a Valid Contract (2)

Dear Readers,

In the last post, we discussed the following four (4) key ingredients of a valid contract. Please click on the link below to read this post again;

A) Offer and Acceptance B) Intention to Create Legal Relationships C) Lawful Consideration D) Lawful Object

http://www.rkstrainings.com/8-essential-elements-of-a-valid-contracts-1/

In view of the above, let us now discuss balance 4 Essential Elements of a Valid Contract: 

E) Certainty & Possibility of Performance F) Capacity of the Parties G) Agreement not declared Void H) Free Consent

Essential Elements of a Valid Contract

E) Certainty and Possibility of Performance

E1 – Certainty of Performance

An agreement is ‘certain’ when Scope of Work and Timelines are mentioned specifically rather than generally. Scope means what to do and timelines means when to do. Accordingly, a contract writer must specify the goods or services expressly and clearly. This is necessary so that both parties draw the same understanding out of it. Otherwise, requirements will be subject to multiple interpretation with lot of subjectivity

Accordingly, certainty is important parameter of a valid contract. On the contrary, if the requirements are not definite (i.e. difficult to understand), such contracts become vague & difficult to enforce.

As per section 29 of Indian Contract Act, agreement, the meaning of which is not certain, or capable of being made certain, are void

E2 Possibility of Performance

If it is not possible for a party to fulfil the promises made under the agreement, the contract is invalid. As per section 56 of Indian Contact Act, an agreement to do an act impossible in itself is void. So, If an act is deemed to be impossible, such agreement is void. Similarly, If an act  become impossible afterwards, such agreement become void when the act become impossible

F) Capacity of the parties (competency)

As per Section 11 of Indian Contract Act, a party is competent to contract, if;

1) it has attained the age of majority accordingly to applicable law and

2) who is of sound mind and;

3) not disqualified from contracting by any law to which he is subject

In view of the above, all parties should be competent to enter into a contract. Accordingly, entering into a contract with a minor (age less than as stipulated under relevant law) is void

Further, Section 12 of Indian Contract Act says that a person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interest. Moreover, entering into a contract with a person who is disqualified from contracting by any law is void

G) Agreement not declared void

Few agreements are expressly declared as void by the law in force in the country. Consequently, one cannot enter into such agreements with other party. For example, under Indian Contract Act, followings agreements are expressly declared as void;

  • Section 26 (Agreement in restraint of marriage) – Every agreement in restrain of marriage of any person, other than a minor, is void
  • Section 27 (Agreement in restraint of trade) – Every agreement by which any one is restrained from exercising a lawful profession, trade or business, is void
  • Section 28 (Agreement in restraint of legal proceedings – Every agreement by which any party is restricted from enforcing his right under any contract or which limit the time within which he may enforce his rights are void

D) Free Consent

Parties must enter into a contract freely and with genuine consent. This means the parties accept the terms of the agreement with their own free will rather than under force. Section 13 of Indian Contract Act, says that two or more parties have consent when they agree upon the same thing in the same sense.

As per section 14 of Indian Contract Act, consent is free when it is not caused by any of the followings:

  1. Coercion – as defined in section 15, or
  2. Undue influence – as defined in section 16, or
  3. Fraud – as defined by section 17, or
  4. Misrepresentation– as defined by section 18
  5. Mistake subject to provision of section 20, 21 and 22

=======================================================================

Disclaimer Statements: http://www.rkstrainings.com/disclaimer-statements/

Please read and accept disclaimer statements by clicking here: http://www.rkstrainings.com/disclaimer-statements/

Agreement not declared void Capacity of the parties Consideration necessary for a valid contract Contract Administration Contract Formation Contract Management Contract Objectives Contract Principles Difference between MOU and Contract Equity Free Consent Indian Contract Act Intention to create legal relationships Justice Lawful Consideration Law Governing Contracts Law governing supply contracts MOst suitable use of MOU Offer and Acceptance Reasonableness Sale of Goods Act Significance of MOU Voidable Contracts Void Agreements What is a Contract What is agreement What is consideration What is MOU whether all agreements are contracts