CONTRACT
The word contract is derived from the Latin word “contractum” which means “drawn together”.
It denotes a drawing together the minds of two or more persons to form a common intention giving rise
to an agreement. A contract is an agreement enforceable by law, which offers personal rights and
imposes personal obligations, which the law protects and enforces against the parties to the agreement.
DEFINITION
Section 2 (h) of the Indian Contract Act defines a contract as “an agreement enforceable by law”.
Therefore, a contract essentially consists of two elements:
1. Agreement: Section 2 defines an agreement as, “every promise and every set of Promises
forming the consideration for each other”. In other words, an agreement is formed Where one
party makes the proposal and the other party accepts it.
2. Enforceability: Only an enforceable agreement can be called a contract. Section 10 of the act
defines “All agreements are contracts if they are made by the free consent of parties competent
to contract, for a lawful consideration and a lawful object, and are not hereby expressly declared
to be void”.
Sir William Anson observes, “A contract is an agreement enforceable at law made between two or more
persons, by whom rights are acquired by one or more to acts or forbearances on the part of the other or
others”.
ESSENTIAL ELEMENTS OF A VALID CONTRACT
The following are the essential elements of a contract, arrived at on the basis of a combined reading of
Section 2(h) and Section 10 of the Indian Contract Act:
1. Offer and Acceptance: There must be a ‘lawful offer’ and ‘lawful acceptance’ of the offer, thus
resulting in an agreement.
For example: If X offers to sell his Maruti Car to Y for Rs. 2,25,000 and Y agrees to pay X Rs.2,25,000
for the Maruti Car. Here X is called the offeror or promisor and Y is the offeree or promise.
2. Consensus ad idem: For a valid agreement, there must be a complete identity of minds between the
contracting parties.
For example: A has two buffaloes but B is aware of only one of these. B proposes to buy the buffalo of
which he is aware. A’s Consents to sell the other buffalo. Since there is confusion in the minds of the
parties, there is no consensus and hence no agreement follows.
3. Free Consent: The contracting parties must give their consent freely. It must not be given due to
coercion, undue influence, fraud, misrepresentation or mistake. The absence of free consent would
affect the legal enforceability of a contract.
For example: An illiterate woman executes a deed of gift under the impression that she is executing a
deed authorizing her nephew to manage her agricultural land. The deed is not read or explained to her.
Here, there is no consent, therefore no contract.
The word contract is derived from the Latin word “contractum” which means “drawn together”.
It denotes a drawing together the minds of two or more persons to form a common intention giving rise
to an agreement. A contract is an agreement enforceable by law, which offers personal rights and
imposes personal obligations, which the law protects and enforces against the parties to the agreement.
DEFINITION
Section 2 (h) of the Indian Contract Act defines a contract as “an agreement enforceable by law”.
Therefore, a contract essentially consists of two elements:
1. Agreement: Section 2 defines an agreement as, “every promise and every set of Promises
forming the consideration for each other”. In other words, an agreement is formed Where one
party makes the proposal and the other party accepts it.
2. Enforceability: Only an enforceable agreement can be called a contract. Section 10 of the act
defines “All agreements are contracts if they are made by the free consent of parties competent
to contract, for a lawful consideration and a lawful object, and are not hereby expressly declared
to be void”.
Sir William Anson observes, “A contract is an agreement enforceable at law made between two or more
persons, by whom rights are acquired by one or more to acts or forbearances on the part of the other or
others”.
ESSENTIAL ELEMENTS OF A VALID CONTRACT
The following are the essential elements of a contract, arrived at on the basis of a combined reading of
Section 2(h) and Section 10 of the Indian Contract Act:
1. Offer and Acceptance: There must be a ‘lawful offer’ and ‘lawful acceptance’ of the offer, thus
resulting in an agreement.
For example: If X offers to sell his Maruti Car to Y for Rs. 2,25,000 and Y agrees to pay X Rs.2,25,000
for the Maruti Car. Here X is called the offeror or promisor and Y is the offeree or promise.
2. Consensus ad idem: For a valid agreement, there must be a complete identity of minds between the
contracting parties.
For example: A has two buffaloes but B is aware of only one of these. B proposes to buy the buffalo of
which he is aware. A’s Consents to sell the other buffalo. Since there is confusion in the minds of the
parties, there is no consensus and hence no agreement follows.
3. Free Consent: The contracting parties must give their consent freely. It must not be given due to
coercion, undue influence, fraud, misrepresentation or mistake. The absence of free consent would
affect the legal enforceability of a contract.
For example: An illiterate woman executes a deed of gift under the impression that she is executing a
deed authorizing her nephew to manage her agricultural land. The deed is not read or explained to her.
Here, there is no consent, therefore no contract.
