Q1 (4) Define void contract.

Ans: A contract that is legally not enforceable from the moment it is formed
can be termed as a Void Contract. It can be nullified for some reasons.
Contracts become void for a variety of reasons, including illegal consideration.
Both voidable contracts and void contracts are different from one another.
Causes of Void Contract
 Presence of any illegal object or element
A contract is deemed to be void it is consists of any illegal object, consideration
or element. For example: If the terms mention illicit substance or promise of sex
or anything that is objectionably caused due to either or both the parties. This
will simply violate the agreement or contract.

 Either or both parties are incompetent

If either one party or both the parties are legally incompetent then the contract
or agreement will be considered as a void contract. If the party or both the party
do not have the capacity to make informed decisions or are incapable to enter
into the agreement then the contract will be null or void.
Void Contract Example
Example 1
Reena agrees to a 50/50 split of royalties from her new album with a record
label. Reena, on the other hand, has been drinking at the bar for several hours
and is severely inebriated at the time of this agreement. Because Reena was
incompetent when she signed the contract, it is null and void.
Example 2
Assume you’re in a similar situation to the previous example. This time, Reena
is a minor, and she hasn’t had anything to drink. The contract is immediately
voidable due to Reena’s small size. However, the agreement is valid because
she was not incompetent. Reena will have the option of continuing the contract
or terminating it.
Example 3
A contract between a local dealer and a drug supplier for an illegal drug
transaction. Because it involves illicit goods, this contract would be null and
void. It is unenforceable from the beginning because it serves no legal purpose.
Another example is a contract that restricts a few activities, such as the right to
work for a living or who a person can marry
Elements of a Void Contract
The presence of the following elements in the agreement or contract will lead to
a void or null agreement/contract:
 Proper inclusion of elements
A contract will be deemed or void if it fails to include complete terms and
conditions laid by both parties.
 Mutual benefit
It is essential for both parties to benefit post entering into the contract or
agreement. If any one party is enjoying the benefit on the cost of another
party then the agreement or contract will be termed as null or void.
 Ensuring the legality of contract
If both the parties simply make a promise then in that case a contract will not
be formed. It is essential for both the parties to indulge legally and establish
their terms and conditions in it. Also, both of them should mutually agree. Or
else, the contract will be void.
 Acceptance
It is essential for both parties to be in an aware state. They should know
about all the terms laid in the contract and acknowledge them mutually. It is
essential to accept the conditions for both parties. In case, either one party or
both do not accept, then this contract will be void.
Void and Voidable Contracts
Both ‘voidable’ contracts and ‘void contracts’ differ from one another. Usually
both the words are replaced and used for one another. A voidable contract is a
valid document. A void contract is not enforceable under the Court of Law.
Steps for Voiding a Contract
Determine which aspects of the contract may be void: –
1. Examine which laws and reasons apply to the contract being void
1. Make sure that all contract-related information is assembled (e.g.,
communication between partakers, signed copies, etc.)
 1. It is essential for parties to decide whether they have to draft a new
contract or whether it should be discarded.
1. Legal action may be taken to evaluate the case and resolve whether or not
the contract is null or void.
Other Considerations
When each arrangement is unique, it can be difficult to determine its validity.
While a contract may not be invalid when written, it may become void as a
result of other factors. New rules may be enacted that render a contract
immediately null and void. Furthermore, previously unknown information to the
contracting parties can nullify the warranty.
Difference Between Void Agreement And Void Contract
Although the terms agreement and contract are used interchangeably in
common parlance, it is essential to understand their distinction. The terms
agreement and contract have different meanings in legal jargon. In a legal sense,
an accepted proposal is a promise. The promisor is the individual or party who
proposes to do or get something, and the promisee is the person or party who
receives the offer. An agreement is a promise supported by a reference from the
promisor and the promisee. A contract is an enforceable contract where the
parties seek legal backing, and specific rules must be followed.
Conclusion
One should always make sure that the contract is the valid one as according to
its nature it can’t be enforced. In case any of the parties tries to breach the
contract, then no one can recover anything on the basis that there wasn’t any
valid contract formed.
Q1 (5) Who are not competent to contract?

Ans:
The primary element of a valid partnership contract is the capability or
eligibility of partners to form a business agreement. The capacity to contract
here means the legal ability of an individual or an entity to enter into a
partnership. According to business law, the partner must be competent and fulfil
the specified criteria before signing a contract.

Section 11 of the Indian Contract Act, 1972 details the capacity in contract law.
It defines the ability to form contracts based on three aspects. They are as
follows.

 Attaining specified age

 Being of sound mind

 Not be disqualified from entering into a contract on the basis of any law
he is subjected to

Apart from contractual capacity, partnership contracts must also include the
following.

 Offer

 Consideration

 Intent

 Legality

 Acceptance

The meaning of contractual capacity can be understood in detail through norms

and examples.
Q2 (2) Explain the concept of Capacity of Parties

One of the most essential elements of a valid contract is the competence of the
parties to make a contract. Section 11 of the Indian Contract Act, 1872, defines
the capacity to contract of a person to be dependent on three aspects; attaining
the age of majority, being of sound mind, and not disqualified from entering
into a contract by any law that he is subject to.

The section 11 declares the following person to have the capacity to enter into a
contract:

1. Attaining the age of majority

2. Being of sound mind

3. Not disqualified from entering into a contract by any law that he is

subject to

The section 11 declares the following persons are incompetent or not

competent to contract:

1. Minor
2. Persons of unsound mind; and
3. Persons disqualified by law to which they are subject.

1. Attaining the Age of 18

A minor does not hold the capacity of holding a contract in business. Any
agreement made with a minor in business is void ab-initio, which means ‘from
the beginning’. If any person aged below 18 years enters into a contract, he
cannot ratify the agreement even when he turns 18. This means that an invalid
agreement can never be ratified.

 Minor being a Beneficiary in a Contract.

Even though a minor is prohibited from entering a contract, he can register
himself as a beneficiary of an agreement. Section 30 of the Indian Partnership
Act, 1932 mentions that a minor cannot participate as a partner in the business,
but he can enjoy the benefits earned by the firm.

 A Minor always enjoys the benefits of being a Minor

A minor gets to enjoy some extra benefits in business. This contractual benefit
needs to be explained in terms of the capacity to contract with examples. For
instance, if a minor pretends to be a major and enters into a contract, he can
later plead the minority through some simple formalities. The rule of estoppel is
not applicable to a minor.

 Contract through the means of a Guardian

In some cases, a guardian can enter into a valid business contract on behalf of a
minor individual. Here, the guardian has no right to bind a minor to buy any
immovable property under the contract. However, with proper certification and
approval, the minor’s property can be sold when required.

 Insolvency
According to business law, a minor cannot be declared insolvent at any point in
time. Even if the minor owes some dues to the firm, he will not be held
personally liable for it.

 Mutual contract by a Minor and an Adult individual

When a joint contract is signed between a minor and major, it has to be done in
the presence of the minor’s guardian. In such contracts, the liability of the
contract is held by the adult.
2. An individual has to be of Sound Mind
Section 12 of the Indian Contract Act (1872) necessitates a person to be of
sound mind, have a complete understanding of the contract terms and
conditions, and hold the ability to judge its impact on his interests.

Here, the capacity of parties to the contract also applies to an individual who is
usually of unsound mind and occasionally in sound mind. However, in this case,
the contract has to be signed when he is in a state of complete soundness. A
contract made by an individual of unsound mind shall be considered as null and
void according to capacity law definition.

A person under the influence of any sort of intoxication is considered incapable

of entering into a contract. Such individuals can make a contract only when they
are sober and have a complete understanding of the contractual terms.

3. People Disqualified under Law

Other than minors and people of unsound mind, some individuals might be
restricted from entering into any contract as well. Such individuals do not hold
the capacity to contract under valid business laws. Disqualification under
contractual laws could include reasons related to politics, legal status, etc. This
could also happen when a person is a foreign sovereign, national enemy,
convict, or insolvent.

 Alien enemies: people who are having citizenship in countries who don't
have cordial relationships with India or in a war situation are called Alien
enemies. People signing the contract during a war situation is not
encouraged and a contract during a peace situation is valid.
 Married women: married women are not allowed to enter a contract
regarding their husband’s property.
 Pardanashin Women: Pardanashin women who will be under influence
are not eligible to be involved in the contract as they cannot understand
the contract.
  State Ambassadors: The ambassadors are incompetent to contract.
 Convict Serving Sentence: People who are on Bail or serving their
sentence are not allowed to sign a contract.
 Patent Officers: People having patent rights are issued by their owners
to them. A patent is a monopoly right given to its owner. Hence patent
officers are not allowed to sign the contract.
 Legal professionals: People who work as judges, advocates, public
prosecutors are not allowed to sign a contract related to their connections.

For example, Advocate has taken a case from a Y person, the legal proceedings
are going on. So advocates cannot sign a contract with that person in buying
that property.

 Insolvent: The insolvent person is allowed to purchase the property but

cannot sell his own property.
 Company: The company is formed under the law. Different companies
are bound by different laws. Here, the company is considered as an
artificial person. The company cannot sign contracts outside its limits.

4.Capacity contract limited due to Mental Illness

Persons with mental illness or disorders are also having limited capacity to
contract irrespective of age. Some of the instances related to campsity are listed
below-

1. Intellectual disability: People with intellectual disability are having an

exception for capacity to contract, it also includes the severity of the
disorder.
2. Advanced dementia: People suffering from dementia are exempted from
involving or signing the contract.
3. Hallucinations and visions: People who are in hallucination and
visualize things without any reference are exempted from signing the
contract.
 4. Affective disorders: People having depressions or bipolar disorder will
have frequent mood changes. So people with these problems are not
allowed to be involved in any contract.

Contracts signed by people with disabilities are considered to be null. Court will
determine whether the contract is legal or illegal. To determine, as a part of the
process, individuals' mental health is determined. People with stress and are
mentally challenged are not allowed to be involved in any contract, if they are
involved then it is invalid.

Based on legal capacity, affected people are categorized into different types.
They are -

 Partial legal incapacity: If a mental disorder or disability is restricted to

a certain area and is normal in day-to-day life, then it is partial legal
incapacity. For example, hallucinations.
 Relative legal incapacity: Relative legal incapacity contradicts Partial
legal incapacity. People who can perform normal activities like shopping,
reading and cannot do long-term contracts are referred to this.
Q3. Short notes:

Q1. Kinds of Contract:

Types of Contract
The Indian Contract Act classifies a contract on the basis of various criterion,
the likes of which is covered in this article. A contract, in general, is a written or
spoken agreement which particularly deals with employment, sales or tenancy
that is enforceable by law. In this article, we look at the different types of
contract under the Indian Contracts Act.
Basis of Classification
A contract is classified on the basis of the following:
 Formation
 Nature of Consideration
 Execution
 Validity
On the Basis of Formation
1. Express Contract
2. Implied Contract
3. Quasi Contract
4. E-Contract
Express Contract
A contract is said to be “Express” if the proposal or acceptance of any promise
is made in words, be it in the written or oral form. The provision is subject to
the condition that the offer so made gains the acceptance of the acceptor.
Implied Contract
Implied contracts, on the other hand, have terms that must be inferred by
actions, facts, and circumstances that would indicate a mutual intent to form a
contract. Such contracts may be as binding as express contracts, despite their
lack of formal agreement, although if a court perceives doubts in minds of the
parties as to whether or not a contract existed, it may choose not to enforce such
a contract. An implied contract is in stark contrast to an express contract, i.e. it
isn’t expressed in written or oral form.
Quasi Contract
Quasi Contracts, unlike others, hold no contractual relations between the
partners but are created by virtue of law. The court may form a Quasi-Contract
under any of the following circumstances:
 Upon the supply of essentials
 Where the expenses of one person are met by another.
 Where one party gains by the activity of another.
 In the case of the finder of lost tools.
 Upon mistaken payments/supply of goods
E-Contract
Electronic, Cyber or Electronic Data Interchange contracts are formed by
electronic means. The means and devices that aid in such formation include
email, telephone, digital signatures, and the likes of it. The contractual terms
here are listed by electronic means or implied by the actions of the users.
On the Basis of Consideration
1. Bilateral Contract
2. Unilateral Contract
Bilateral Contract
A contract is called bilateral, or in other words reciprocal, when it comes with
mutual considerations. It is formed when two parties agree to the contractual
terms of each other.
Unilateral Contract
A contract is classed as unilateral where only one party makes a promise, which
could be availed by anyone who is ready to be committed to the same. Such a
contract can only be fulfilled if someone else fulfils the promise.
On the Basis of Execution
1. Executed Contract
2. Executory Contract
Executed Contract
A contract is termed as executed if the performance stipulated under it has been
completed by one, both or all parties. Most of these contracts are performed
instantaneously, such as buying of goods and/or services.
Executory Contract
An executory contract involves the performance of consideration at a future
point of time; which means the promises of consideration cannot be completed
instantaneously as in an executed contract.
On the Basis of Validity
1. Valid Contract
2. Void Contract
3. Voidable Contract
4. Illegal Contract
5. Unenforceable Contract
Valid Contract
Valid contracts must satisfy all the contract requirements, making it legally
binding and enforceable. These requirements include:
 The making of offer and its acceptance, making it eligible for
registration.
 The existence of a legal relationship.
 The existence of a lawful consideration and object.
 The parties concerned are competent to form a contract.
 Free consent of the parties.
 Certainty in the terms of the contract.
 The capability of performance (of the contract).
 The contract hasn’t been expressly declared void under the contract laws.
Void Contract
Any contract which is not in line with the contract requirements as highlighted
above is classified as void.
Voidable Contract
A contract is considered as voidable on the existence of an agreement which is
enforceable by law at the option of one or more of the parties concerned, but not
at the option of the others. In simple terms, at least one of the parties to the
contract must be bound to the terms specified in it. The other party, who could
be a minor or is temporarily incapable of a contract owing to other reasons, isn’t
bound by it and may repudiate or accept the terms of the contract. If the latter
chooses to repudiate, the contract becomes void.
Illegal Contract
A contract is termed illegal by the court if:
 It allows one or all the parties to break the law or not adhere to society’s
norms.
 It is opposed to public policy.
All illegal contracts can be void/voidable/valid, but it cannot be the other way
around. For example, party X may have a contract to sell narcotics to party Y,
and the contract may be on par with the essentials. Such a contract is valid on
the basis of these essentials but is otherwise illegal and non-enforceable by law.
Parties in default of these contracts are legally punishable.
Unenforceable Contract
A contract is unenforceable if it fails to complete the required legal obligations.
Such a contract can be enforced upon completing these formalities, the likes of
which mostly occur in the form of technical defects.
Types of Quasi Contract
1. Supply of Necessities to Incapable Persons (Section 68):
If a man or woman is incapable of entering into a contract, or all people whom
he is legally sure to support is supplied by means of any other person with
necessaries, applicable to his condition in life, the man or woman who has
furnished such resources is entitled to be reimbursed from the property of such
an incapable person.
2. Payment by Way of a Fascinated Character (Section 69):
According to section 69, an individual who is willing in a monetary fee that
anyone else is bound to pay, and who, as a result, may pay it, is entitled to
compensation from the other.
3. Obligation to Pay Gratuitous Non-Acts (section 70):
According to section 70, when a person lawfully does or gives you something
for the other, no longer intending to do so gratuitously, and the person derives
any gain from it, he is responsible for compensating or fixing the factor so done
or delivered.
4. Responsibility of Finder of Goods (section 71):
According to section 71, a man or woman who finds goods of someone else and
takes them into his custody is a concern to identical accountability as the bailee
is sure to take a lot care of the items as a man of everyday prudence would.
In addition to that, he ought to make efforts to trace the owner. If not, he will be
responsible for one-sided conversation. Until the proprietor is observed, the
property will vest with the finder; he can sell in case items are perishable, the
owner cannot be found, the proprietor refuses to pay for the legal fees etc.
5. Payment of Delivery via Mistake or Coercion (section 72):
“Liability of individuals to whom cash is paid, or issue delivered by way of
mistake or coercion.” It is the capacity of the liability of the person to whom
cash is paid or matters delivered by using mistakes or beneath coercion, to repay
the money or return the goods to the proper owner.
Conclusion
A quasi-contract concludes that the principle of a quasi-contract is frequently
overlooked. However, it still holds an important place when you consider that
the precept is grounded on ideas of justice and equity. It can be concluded that
quasi contracts are no longer contracts as per the Indian Contract Act 1872.
However, several tasks are imposed with the aid of law and only in favourable
situations. Quasi-contracts only create duty so that there is no unjust enrichment
on one party.
A quasi-contract exists in the absence of a written contract. It may additionally
be a court docket ordered to keep away from one party gaining at the fee of
another party’s actions. However, the simple nature and essence of the principle
remain identical besides any drastic change.
Short Note Q3 (2): Minor position under Indian Contract Act, 1872

Introduction:
A minor is a person who has not yet completed the age of majority by law to
which he is subject. In India, the age of majority is attained after the completion
of 18 years except in the case of a person where a guardian has been appointed
by the Court, the age fixed is 21 years. However, it is to be noted that the Indian
Majority Act, 1875 has been amended and the age of the majority is considered
to be 18 years, irrespective of the fact that a guardian has been appointed for the
minor.
Explanation
Section 10 of the Contract Act talks about the competency of the parties and
Section 11 talks about persons who are not allowed to enter into a contract. But
neither section makes it certain, what will be the consequences of a minor
entering into an agreement, whether it would be voidable at his option or
altogether void. Thus, these provisions had created a
legal conundrum/confusion about the nature of a minor’s agreement. The Privy
Council finally resolved this controversy through the landmark case of Mohori
Bibi vs Dharmodas Ghose where Dharmodas Ghose, a minor, mortgaged his
house for Rs. 20,000 to a money lender. At the time of the contract the legal
representative, who acted on behalf of the moneylender was aware that the party
was a minor. The minor brought a suit against the moneylender stating that he
was a minor at the time of the contract and, therefore, the contract was void and
incompetent. But at the time of Appeal to the Privy Council, the defendant died
and the Appeal was filed by his wife, Mohori Bibi. The Privy Council by
clearing the air in the above case said that the minor’s agreement is void ab
initio i.e. void from the beginning. The general belief that “every man is the
best judge of his own interest” is excluded in the case of a minor.
Conclusion
A minor’s agreement is considered void thus, there should be no duty
to perform any part of the contract from either party and the effects of the same
are also void.
Q 3 (3) Remedies for breach of contract

Introduction

When a promise or agreement is broken by any of the parties, it is called a

breach of contract. So, when either of the parties does not keep their end of the
agreement or does not fulfil their obligation as per the terms of the contract, it is
a breach of contract.
The Indian Contract Act, 1872 lays out all the provisions for the performance of
a contract:
1] Recession of Contract (S:65)
When one of the parties to a contract does not fulfil his obligations, then the
other party can revoke the contract and refuse the performance of his
obligations.
As per section 65 of the Indian Contract Act, 1872, the party that revokes the
contract must restore any benefits he got under the said agreement. And section
75 states that the party that revokes the contract is entitled to receive damages
and/or compensation for such a recession.
2] Sue for Damages (S:73)
Section 73 clearly states that the party who has suffered, since the other party
has broken promises, can claim compensation for loss or damages caused to
them in the normal course of business.
Such damages will not be payable if the loss is abnormal in nature, i.e. not in
the ordinary course of business. There are two types of damages according to
the Act,
 Liquidated Damages: Sometimes the parties to a contract will agree to the
amount payable in case of a breach. This is known as liquidated damages.
 Unliquidated Damages: Here the amount payable due to the breach of
contract is assessed by the courts or any appropriate authorities.
3] Sue for Specific Performance
This means the party in breach will actually have to carry out his duties
according to the contract. In certain cases, the courts may insist that the party
carry out the agreement.
So, if any of the parties fails to perform the contract, the court may order them
to do so. This is a decree of specific performance and is granted instead of
damages.
For example, A decided to buy a parcel of land from B. B then refuses to sell.
The courts can order B to perform his duties under the contract and sell the land
to A.
4] Injunction
An injunction is basically like a decree for specific performance but for a
negative contract. An injunction is a court order restraining a person from doing
a particular act.
So, a court may grant an injunction to stop a party of a contract from doing
something he promised to do. In a prohibitory injunction, the court stops
the commission of an act and in a mandatory injunction, it will stop the
continuance of an act that is unlawful.
5] Quantum Meruit
Quantum meruit literally translates to “as much is earned”. At times when one
party of the contract is prevented from finishing his performance of the contract
by the other party, he can claim quantum meruit.
So he must be paid a reasonable remuneration for the part of the contract he has
already performed. This could be the remuneration of the services he has
provided or the value of the work he has already done.

Q3(4) Under the influence

Undue influence is referred to the section 16 of the Indian Contract Act, 1872.
Undue influence occurs when an individual is able to persuade another's
decisions due to the relationship between the two parties. Often, one of the
parties is in a position of power over the other due to elevated status, higher
education, or emotional ties. The more powerful individual uses this advantage
to coerce the other individual into making decisions that might not be in their
long-term best interest.
Thus, a person is deemed to be in a position to cause undue influence—
(a) where he holds a real or apparent authority over the other, or where he
stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is
temporarily or permanently affected by reason of age, illness, or mental or
bodily distress.

Undue influence is an equitable doctrine that involves one person taking

advantage of a position of power over another person. This inequity in power
between the parties can vitiate/influence one party's consent as they are unable
to freely exercise their independent will. In exerting undue influence, the
influencing individual is often able to take advantage of the weaker party. In
contract law, a party claiming to be the victim of undue influence may be able
to void the terms of the agreement.

Illustration:
1. A, being in debt to B, the money-lender of his village, contracts a
fresh loan on terms which appear to be unreasonable. It lies on B to
prove that the contract was not induced by undue influence.
2. A, being in debt to B, the money-lender of his village, contracts a
fresh loan on terms which appear to be unreasonable. It lies on B to
prove that the contract was not induced by undue influence."

Q3 (5) Quasi Contract

Quasi Contracts, unlike others, hold no contractual relations between the

partners but are created by virtue of law. The court may form a Quasi-Contract
under any of the following circumstances:
 Upon the supply of essentials
 Where the expenses of one person are met by another.
 Where one party gains by the activity of another.
 In the case of the finder of lost tools.
 Upon mistaken payments/supply of goods
Q2 (1) Discuss the rule of valid acceptance?
The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the
person to whom the proposal has been made signifies his assent thereto, the
offer is said to be accepted. Thus the proposal when accepted becomes a
promise.”

So as the definition states, when the offeree to whom the proposal is made,
unconditionally accepts the offer it will amount to acceptance. After such an
offer is accepted the offer becomes a promise.

Say for example A offers to buy B’s car for rupees two lacs and B accepts such
an offer. Now, this has become a promise.

When the proposal is accepted and it becomes a promise, it also becomes

irrevocable. An offer does not create any legal obligations, but after the offer is
accepted it becomes a promise. And a promise is irrevocable because it creates
legal obligations between parties. An offer can be revoked before it is accepted.
But once acceptance is communicated it cannot be revoked or withdrawn.

Rules regarding Valid Acceptance

1. Acceptance must be absolute and unqualified

The offeree’s approval cannot be conditional.For example, ‘A’ wants to sell her
car to ‘B’ for Rs 2 lakh, ‘B’ can’t come back and says that she accepts the offer
but will buy the same for Rs. 1 lakh.

2. Acceptance must be told to the offeror

If the acceptor just accepts the offer in his head and he does not mention the
same to the offeror, it can not be called an Acceptance, whether in an express
manner or an implied manner.

3. Acceptance must be recommended in the following mode

Acceptance is sometimes required in a prescribed/specified communication
mode.

4. In a reasonable amount of time, the acceptance is given

It’s very rare that an offer is always to get acceptance at any time and at all
times. Therefore, the offer defines a time limit. If it does not, it should not be
acknowledged forever.

5. Mere silence is not acceptance

If the offeree fails to respond to an offer made to him, his silence can not be
confused with acceptance. But, there is an exception to this rule. It is stated that,
within 3 weeks of the date on which the offer is made, the non-acceptance shall
be communicated to the offeror. Otherwise, the silence shall be communicated
as acceptance.

6. Communication of acceptance (Section 4)

Communication of acceptance is complete when it is put in the course of

transmission to him as to be out of the power of the acceptor to withdraw the
same and when it comes to the knowledge of the proposer.

7. Time of revocation of acceptance

An acceptance may be revoked at any time, but not afterward, before the
communication of the acceptance is complete as against the acceptor.

Conclusion

Examination of offer and acceptance is a standard contract law method used to

assess whether a two-party arrangement exists. An offer is a sign of their
willingness to agree on certain terms from one person to another. If there is an
express or implied agreement, a contract will then be formed. A contract is said
to come into being when the acceptance of an offer has been told to the offeror
by the offeree.

The communication of the offer shall be complete when it comes to the

knowledge of the person to whom the offer is made and the communication of
the acceptance shall be complete when the acceptance is put in a course of
transmission to the offeror. Therefore, offer and acceptance are the essential
elements of a contract and in either case, it should be done on the basis of one’s
free will and with the intention of concluding a legally binding agreement.
Q2 (4) Explain the essential of a valid contract.

Answer:

Essentials Elements of a Valid Contract

According to the Indian Contract Act 1872, "Agreements are also contracts
made by the consent of parties, competent to contract to consider with a lawful
object and are not hereby expressly declared to be void”. Therefore, the contract
or the agreement must carry essential aspects to maintain the normal phase of
duties by both parties.

Example:

A and B underwent the contract, where A will purchase 10 bags of cement for
Rs 1, 00,000. B promises to supply the same in the given period and the quality
mentioned. A promise to pay the sum as per the mentioned method in the
contract. In this case, both parties have to perform the act as per the agreement
signed.

Essentials of a valid contract:

1. Offer and Acceptance

Generally, the written contract only unfolds when the other party accepts the
offer by one party and is definite in all sense. The offer or agreement must be
clear and complete in all sense. Both parties should communicate to ensure
there is no lapse in the contract act. Both the offer and acceptance must be
"consensus ad idem", meaning, both parties must comply with the same thing.

2. Intention to Create a Legal Relationship

To bind, both parties should have a specific intention that can create a legal
relationship, resulting in an agreement. Agreements in social or household
nature are not contracts because parties do not intend to build legal
relationships.

3. The Intent of Legal Obligations

One of the essential elements of a valid offer is that both parties subject to a
contract must be clear with the intentions of creating a legal relationship. This
also means that agreements that are not enforceable by the law like agreements
between relatives are enforceable in the court of law.

4. Possibility of Performance of Agreement

In this case, suppose two people decide to undergo an agreement where person
A agrees to bring person B’s dead relative back to life, this will not fall under
the legal contract act because bringing back the deceased person alive is an
impossible task. Thus, the agreement does not stand valid.

5. Legal Formalities

In this agreement, if there is any uncertainty and both parties are not capable of
finding the right path, then it is deemed void. As a part of the essentials of a
valid consideration, the terms and conditions of the contract should be concrete.
Any contract, which is uncertain in any sense, can be termed as void. The terms
mentioned in the agreement should be capable of performing specific thoughts.

6. Consideration

Consideration means the moral value given for the performance of the promise.
It should not be only limited to money, but there should be some value to what
has been agreed upon. One of the essentials of valid consideration is that it
should not be adequate, but should carry some value.

Some Pointers Under Consideration are:

 Consideration is wholly according to the desire of the promisor, which

means the review must come from the promisor. Consideration can be
either:

 Past Consideration

 Present Consideration

 Future Consideration

 Consideration can be tangible, like the performance of the service like

teaching and labor.

These are the essentials of a valid contract, which needs to be fulfilled by the
contract act of India. Before getting into any agreement, it is essential to know
what action has led.
Q. Explain features of consideration.

The six essentials of a valid consideration are explained below in detail.

1. Given at the Desire of the Promisor

The consideration should be given at the desire of the promisor, not that of the
third person. The act done at the plaintiff’s desire may be of no significance or
personal benefit to the plaintiff – it will be considered a good consideration.

In Durga Prasad vs Baldeo (1880), the defendant spent some money on

construction at the desire of the district’s collector. Plaintiff promised to pay
commission to the defendant on articles sold by him in the market in which he
occupied a shop.

In a suit by the defendant, it was held that there was no consideration for the
promise made by the plaintiff and hence no contract as he had not constructed
that market at the plaintiff’s instance.

2. Given by the Promisee or Any Other Person

The consideration doesn’t need to be given by the promisee. It may come from
any other person also. It is immaterial as to who furnished it.

In Chinnaya vs Ramayya, an old lady gifted her entire property to her daughter
under the condition that she would give annuity to her uncle. Annuity means
paying someone a fixed sum of money each year, typically for the rest of their
life. She agreed to pay annuity but stopped after some time and filed a plea that
no consideration was moved by her uncle. The court rejected the plea and held
that indirect consideration was already moved by her aunt.

3. Consideration May Be Past, Present or Future

The past, present, and future nature of the consideration can be inferred from
the definition of ‘consideration’ as given under section 2(d) of the Indian
Contract Act.

A consideration is called past consideration when the act is done before any
promise is made. Example: X renders his service to Y, and Y promises to pay a
sum of ₹500 for the service after a month. This is past consideration.

When consideration is given simultaneously with the promise is called present

consideration. It is also known as executed consideration. Example: Sale of an
article in cash.

When a promise is made to do or abstain from doing something in future, it is

called future consideration. It is also known as executory consideration. It is
a promise for a promise. Example: X agrees to sell Y 10 quintals of wheat at
₹10000 when they will be harvested.

4. It Must Be Real, Certain and Lawful

In a contract where consideration is unreal, uncertain or unlawful, such contract

is void.

If X agrees to sell his car to Y at whatever price he wants to pay is an uncertain

consideration.

If Y promises to pay ₹10000 to X to beat up Z, it is an illegal consideration.

5. Consideration May Be Positive or Negative

There should be some act or abstinence. Consideration may be positive when

the promisee does something at the express wish of the promisor. Consideration
may be negative when the promisee is abstained from doing something at the
wish of the promisor.

6. It Need Not Be Adequate

Consideration need not necessarily be adequate. The law provides that there
should be a consideration for a valid contract. It may or may not be adequate.
The adequacy of consideration is for the parties to consider at the time of
agreement. A contract cannot be held invalid on the grounds of the inadequacy
of consideration. For instance, X decides to sell his wheat produce valued at
₹10000 for ₹2000 to Y. Such agreement will be deemed to be a contract if X
has free consent.