Define contract? What are the essentials of valid contract? An agreement enforce by law
11/September/2025 10:41
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Contract: Meaning, Definition & Essentials
Definition of Contract
The Indian Contract Act, 1872 defines a contract in Section 2(h):
“An agreement enforceable by law is a contract.”
This means:
Agreement = Offer + Acceptance
Contract = Agreement + Legal enforceability
So, every contract is an agreement, but not every agreement is a contract.
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Agreement vs. Contract
Agreement (Sec. 2(e)): “Every promise and every set of promises forming the consideration for each other.”
→ Example: If A promises to sell his bike to B for ₹50,000, and B accepts, this is an agreement.
Contract (Sec. 2(h)): Agreement enforceable by law.
→ If A is 17 years old (minor), the agreement with B is not a contract, because it’s not legally enforceable.
✅ Thus:
All contracts are agreements (since they start as agreements).
But all agreements are not contracts (because not all are legally enforceable).
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Essentials of a Valid Contract (as per Indian Contract Act, 1872)
1. Offer and Acceptance
There must be a lawful offer by one party and lawful acceptance by the other.
Example: A offers to sell his car for ₹3 lakh, B accepts → valid offer & acceptance.
2. Intention to Create Legal Relationship
The parties must intend that the agreement should create legal obligations.
Example: A invites B for dinner → not a contract (no legal intention).
Example: A agrees to sell his bike to B → contract (legal intention).
3. Lawful Consideration (Sec. 2(d))
Consideration = something in return. It must be real, lawful, and have value.
Example: Selling goods for money.
4. Capacity of Parties (Sec. 11)
Parties must be competent:
Must be of sound mind.
Must be of legal age (18 years).
Must not be disqualified by law.
5. Free Consent (Sec. 14)
Consent must not be obtained by:
Coercion,
Undue influence,
Fraud,
Misrepresentation,
Mistake.
6. Lawful Object (Sec. 23)
The purpose of the contract must be legal.
Example: A contract to smuggle goods is void.
7. Certainty and Possibility of Performance (Sec. 29 & 56)
Terms must be clear and performance possible.
Example: A promises to bring stars from the sky → void (impossible).
8. Not Expressly Declared Void
Agreements that are declared void by law (wagering agreements, immoral contracts, etc.) cannot be contracts.
9. Legal Formalities
Certain contracts must be in writing, registered, or stamped (e.g., sale of property).
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Examples
1. A promises to sell his phone to B for ₹10,000, and B agrees to buy.
→ Valid contract (all essentials present).
2. A minor agrees to sell his bike to B.
→ Agreement, but not a valid contract (no capacity to contract).
3. A and B agree to smuggle diamonds.
→ Not a contract (object unlawful).
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Conclusion
Contract = Agreement + Legal enforceability.
Essentials include offer, acceptance, consideration, legal capacity, free consent, lawful object, and certainty.
Agreements like social promises (dinner, friendship) are not contracts because they lack legal enforceability.
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