THE INDIAN CONTRACT ACT, 1872 ESSENTIAL ELEMENTS OF A VALID CONTRACT [Section 10]: According to Section 10, All

agreements are contracts if they are made by free consent of parties, competent to contract, for a lawful consideration and with a lawful object and are not hereby expressly declared to be void. The essential elements of a valid contract are: Agreement(Offer and Acceptance): To constitute a contract there must be an agreement. There must be two parties to an agreement, i.e. one party making an offer (offeror) and the other party accepting the offer (offeree). The terms of the offer must be definite and acceptance must be absolute and unconditional. The acceptance must be according to the mode prescribed and must be communicated to the offeror. Intention to create legal relationship: When the two parties enter into an agreement, there must be an intention by both parties to legally bind the other as a result of such agreement. Thus, agreements of social or household nature are not contracts. Capacity of parties (competence): The parties to the agreement must be capable of entering into a valid contract. According to Section 11, every person is competent to contract if he or she, 1. is of the age of majority; 2. is of sound mind; and 3. is not disqualified from contracting by any law to which he is subject. Lawful Consideration: An agreement to form a valid contract should be supported by consideration. Consideration means something in return (quid pro quo). It can be cash, kind, an act or abstinence. It can be past, present or future. However, consideration should be real and lawful. Free and genuine consent: To constitute a valid contract there must be free and genuine consent of the parties to the contract. The consent of parties is said to be free when they are of the same mind on all the material terms of the contract. The parties are said to be of the same mind when they agree about the subject matter of the contract in the same sense and at the same time. It should not be obtained by misrepresentation, fraud, coercion, undue influence or mistake. Lawful object: The object of the agreement must not be illegal or unlawful. Section 23: According to Section 23, the consideration or object of an agreement is lawful, unless It is forbidden by law; or Is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; or Involves or implies, injury to the person or property of another; or The court regards it as immoral, or opposed to public policy. Agreement not declared void or illegal: Agreements which have been expressly declared void or illegal by law are not enforceable at law; hence does not constitute a valid contract. Certainty and possibility of performance: The terms of agreement must be certain and not vague. If it is not possible to ascertain the meaning of the agreement, it is not enforceable at law. Also, agreements to do impossible acts cannot be enforced LEGAL RULES REGARDING CONSIDERATION 1. Consideration must move at the desire of Promisor: Example X polished Ys shoes without obtaining any permission of Y. In this case, Y is not liable to pay anything to X, as the action of polishing was not done at the desire of X. 2. Consideration may move from the promisee or any other person on his behalf: Example : A agreed to transfer his property to son B upon fulfilment of certain conditions like that he will pay Rs.20,000 annually to his mother. Important Case: Chinnaya V. Ramaya (1818) Facts of Case: A father, by a gift deed, made over certain property to his daughter, with the direction that the daughter should pay an annuity to the fathers brother. On the same day, the daughter entered into an agreement with her uncle and agreed to pay the annuity. Later, the daughter declined to fulfil her promise on the ground that no consideration was paid by fathers brother to her.

Decision of the Case: The Court held that the consideration was paid by the father on behalf of her uncle. So the uncle was entitled to recover the annuity.

3. Consideration may be Past, Present or Future: (a) Past Consideration: If a person has already done something for another, and then comes a promise from the other, the consideration is said to be past consideration. Example: A found Bs lost watch and returned to B. After a month, B announced to give Rs.1000 to A, as reward for the services rendered by him. In this case, B is paying Rs.1000 for past consideration. (b) Present/ Executed Consideration: When consideration is given simultaneously with promise, it is called present consideration. Example A promise to give Rs.1000 to B for bringing a bag from the market, B brings and A gives him Rs.1,000 as per promise. (c) Future Consideration: When the consideration is to move at some future date. Example: A promises to pay Mr.B after one month, if he sends him the goods now.

4. Consideration must be real and not illusory: It should exist in the eyes of law. A promises to put life into Bs dead wife. Should B pay him Rs 50000 ? No,because As promise is physically impossible to perform. 5. Consideration need not to be adequate: Consideration means something in return and this something in return need not necessarily be equal in value to something given. Example: A agrees to sell his Car for Rs.10,000. The Car could be sold for Rs.50,000. Later on, A cannot refuse to sell his car to C on the ground that the consideration is not adequate.

6. Consideration must not be illegal, Immoral or Opposed to Public Policy. Example: X promises Y to pay Rs1000 to beat Z, Y beats Z and claims Rs1000 from X , X refuses to pay. Y cannot recover because the agreement is void on the ground of unlawful consideration. 7. Something other than Promisors existing obligation: The act constituting consideration must be something which the promisor is not already bound to do because a promise to do what a promisor is already bound to do adds nothing to the existing obligation. Example: X promises Y, his advocate to pay an additional sum if the suit was successful. The suit was declared infavour of X but X refused to pay the additional sum. It was held that Y could not recover the additional sum because the promise to pay additional sum was void as Y was already bound to render his best of services under the original agreement.[Ramachandra Chintamana v.Kalu Raju]