An agreement becomes enforceable by law when it fulfils essential conditions.

These
conditions may be called the essentials of a valid contract, which are as follows:
1. Offers and Acceptance
For an agreement there must be a lawful offer by one and lawful acceptance of that
offer from the other party. The term lawful means that the offer and acceptance must
satisfy the requirements of Contract Act. The offer must be made with the intention of
creating legal relations otherwise, there will be no agreement.
Example:
A say to B that he will sell his cycle to him for Rs.2000. This is an offer. If B accepts this
offer, there is an acceptance.
2. Legal Relationship
The parties to an agreement must create legal relationship. It arises when parties know
that if one for the failure of a contract. Agreements of a social or domestic nature do not
create legal relations and as such cannot give rise to a contract. It is presumed in
commercial agreements that parties intend to create legal relations.
Example:

1. A father promises to pay his son Rs.500 every month as pocket money. Later, he
refuses to pay. The son cannot recover as it is a social agreement and does not create
legal relations.
2. A offers to sell his watch to B for Rs.200 and B agrees to buy it at the same price,
there is a contract as it creates legal-relationship between them.
3. A husband promised to pay his wife a household allowance of 30 pounds every
month. Later, the parties separated and the husband failed to pay. The wife used for
allowance. Held that the wife was not entitled for the allowance as the agreement was
social and did not create any legal obligations.

3. Lawful Consideration
The third essential of a valid contract is the presence of consideration. Consideration is
“something in return.” It may be some benefit to the party. Consideration has been
defined as the price paid by one party for the promise of the other. An agreement is
enforceable only when both the parties get something and give something. The
something given or obtained is the price of the promise and is called consideration.
Example:

1. A agrees to sell his house to B for Rs.10 Lac is the consideration for A’s promise
to sell the house, and A’s promise to sell the house is the consideration for B’s promise
to pay Rs.10 Lac. These are lawful considerations.
2. A promise to obtain for B employment in the public service, and B promise to pay
10,000 rupees to A. the agreement is void, as the consideration for it is unlawful.

4. Capacity of Parties:
 An agreement is enforceable only if it is entered into by parties who possess contractual
capacity. It means that the parities to an agreement must be competent to contract.
According to Section 11, in order to be competent to contract the parties must be of the
age of majority and of sound mind and must not be disqualified from contracting by any
law to which they are subject. A contract by a person of unsound mind is void  ab-initio
(from the beginning).
If one of the parties to the agreement suffers from minority, madness, drunkenness etc.,
the agreement is not enforceable at law, except in some cases.
Example:

1. M, a person of unsound mind, enters into an agreement with S to sell his house
for Rs.2 lac. It is not a valid contract because M is not competent to contract.
2. A, aged 20 promises to sell his car to B for Rs.3 Lac. It is a valid contract
because A is competent to contract.

5. Free Consent:
It is another essential of a valid contract. Consent means that the parties must have
agreed upon the same thing in the same sense. For a valid contract it is necessary that
the consent of parties to the contact must be free.
Example:

1. A compels B to enter into a contract on the point of pistol. It is not a valid contract
as the consent of B is not free.

6. Lawful Objects:
It is also necessary that agreement should be made for a lawful object. The object for
which the agreement has been entered into must not be fraudulent, illegal, immoral, or
opposed to public policy or must not imply injury to the person or property of another.
Every agreement of which the object or consideration is unlawful is illegal and the
therefore void.
Example:
A promise to pay B Rs.5 thousand if B beats C. The agreement is illegal as its object is
unlawful.

7. Writing and Registration:

According to Contract Act, a contract may be oral or in writing. Although in practice, it is

always in the interest of the parties that the contract should be made in writing so that it
may be convenient to prove in the court. However, a verbal contract if proved in the
court will not be considered invalid merely on the ground that it not in writing. It is
essential for the validity of a contact that it must be in writing signed and attested by
witness and registered if so required by the law.
 Example:

1. A Verbally promises to sell his book to y for Rs.200 it is a valid contract because
the law does not require it to be in writing.
2. A verbally promises to sell his house to B it is not a valid contract because the
law requires that the contract of immovable property must be in writing.

8. Certainity:
According to Section 29 of the Contract Act, “Agreements the meaning of which are not
certain or capable of being made certain are void.” In order to give rise to a valid
contract the terms of the agreement, must not be vague or uncertain. For a valid
contract, the terms and conditions of an agreement must be clear and certain.
Example:

1. A promised to sell 20 books to B. It is not clear which books A has promised to

sell. The agreement is void because the terms are not clear.
2. A agrees to sell B a hundred tons of oil. It is not clear what is the kind of oil. The
agreement is void because of it uncertainty.
3. O agreed to purchase a van from S on hire-purchase terms. The price was to be
paid over two years. Held there was no contract as the terms were not certain about
rate of interest and mode of payment.

9. Possibility of Performance:
The valid contract must be capable of performance section 56 lays down that. “An
agreement to do an act impossible in itself is void.” If the act is legally or physically
impossible to perform, the agreement cannot be enforced at law.
Example:

1. A agrees with B to discover treasure by magic, the agreement is not enforceable.

2. A agrees with B to put life into B’s dead brother. The agreement is void as it is
impossible of performance.

10. Not Expressly Declared Void:

An agreement must not be one of those, which have been expressly declared to be void
by the Act. Section 24-30 explains certain types of agreement, which have been
expressly declared to be void. An agreement in restraint of trade and an agreement by
way of wager have been expressly declared void.
Example:
A promise to close his business against the promise of B to pay him Rs.2 lac is a void
agreement because it is restraint of trade.
Legal Rules Regarding Consideration
Enforcing any legal contract requires it to have an element of consideration included in it. In
simple words, it is nothing but a price that the promisee agrees to pay to the promisor. Now,
this price can be paid as a benefit to the promisor and/or a loss or detriment to the promisee.
In this article, we will look at this dual aspect of consideration in detail.

Basic Understanding of Consideration

According to Section 2(d) of the Indian Contract Act, 1872, consideration is defined as
follows:

“When at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or abstain from doing
something, such act or abstinence is called a consideration for the promisee.”

This is a complex sentence. Let’s break it down for further understanding and rewrite it as
follows:

At the desire of the promisor if the promisee either

 Does something (in the past, present or future) OR

 Abstains from doing something (in the past, present or future)
Then, this act of doing or abstinence is called Consideration. Now, it has two aspects, either
doing some act or abstaining from doing something. Let’s look at some examples:

Example 1 – Doing something

Peter and John enter into a contract where Peter promises to deliver 15 curtains to John in
one month’s time. Also, John promises to pay Peter an amount of Rs 3,000 on delivery. In
this contract, John’s promise to pay Rs 3,000, on delivery, is the consideration for Peter’s
promise. Also, Peter’s promise of delivering 15 curtains is the consideration of John’s
promise to pay.

Example 2 – Not doing something

Peter has taken a loan from his friend John. However, he has not repaid the loan yet. John
promises not to file a suit against Peter if he promises to repay the loan within a week. In
this case, abstinence on the part of John is due to the consideration of Peter’s promise of
repayment of the loan.
Rules Regarding Consideration

According to Section 2(d) of the Indian Contract Act, 1872, the follows features are
essential for a valid consideration:

(i) Consideration must move at the desire of the promisor

Consideration can be offered by the promisee or a third-party only at the request or desire of
the promisor. If an action is initiated at the desire of the third-party, it is not a consideration.

Peter is going back home from work. On his way, he sees that his neighbor John’s house is
on fire. He immediately arranges for a water hose and manages to douse the fire. Peter
cannot claim any reward for his effort because it was a voluntary act and was not done at the
desire of John (promisor).

(ii) Consideration may move from the promisee to any other person

If you look at the definition of consideration according to section 2 (d) of the Indian
Contract Act. 1872, it explicitly states the phrase ‘promisee or any other person…’ This
essentially means that in India, consideration may move from the promise to any other
person. However, it is important to note that there can be a stranger to consideration but not
a stranger to the contract.

Peter gifted his son, Oliver an apartment in the city with a condition that he pays a fixed
amount of money to his uncle, John, every year. On the same day, Oliver executed a deed to
pay a fixed amount of money to John every year. However, Oliver failed to pay and John
filed a suit for recovery. Oliver pleaded that he was not liable since no consideration had
moved from John. However, the court held the words ‘promisee or any other person…’ and
allowed John to maintain his suit for recovery.

(iii) It can be in the past, present or future

a.      Past
Since consideration is the price of a promise, it is normally given to induce the promise.
However,it can be given before the promise is made by the promisor. This is past
consideration. It is important to note that past consideration is not considered for a new
promise since it is not been given in lieu of the promise. According to Indian law, ‘past
considerations’ is ‘good consideration’ if it was given at the desire of the promisor.

Peter employs John to work on his field during the months of agricultural harvesting. He
promises to pay John an amount of Rs 5,000 for his services when he sows the new crop in
the fields. The services of John in the past constitute a valid consideration.

a.1. Past Voluntary services

At times, a person might render voluntary services without any request or promise from
another. If the person receiving the services makes a subsequent promise to pay for the
services, then such a promise is enforceable in India under Section 25(2) of the Indian
Contract Act, 1872 which states:

‘An agreement made without consideration is void, unless it’s a promise to compensate,
wholly or in part, a person who has already voluntarily done something for the promisor, or
something which the promisor was legally compellable to do; or unless.’

Peter finds John’s wallet on the road. He returns it to him and John promises to pay Peter Rs
500 for his services. This is a valid contract.

b.      Present

If the promise and consideration take place simultaneously then it is present or executed
consideration. An example is Peter goes to a shop, buys a bag of chips and pays for the
same on-spot.

c.       Future

When the consideration for a promise moves after the contract is formed, it is a future or
executor. It is also valid if it depends on the condition.

Peter promises to create architectural plans for John’s new house. John promises to pay
Peter an amount of Rs 50,000 provided the plans are approved by his wife.
(iv) It must have value in the eyes of the law

While the law allows the parties to decide an ‘adequate’ consideration for them, it must be
real and have value in the eyes of law. While the Court will not consider inadequacy, it will
look at it to determine if the consent was given by the party with free-will or not.

Peter’s wife agrees to withdraw the suit she has filed against him in return for his promise to
pay her a monthly maintenance amount. This is a good consideration and holds value in the
eyes of law.

(v) It should be over and above the Promisors’ existing obligations

If the promisor is already obligated either by his promise or law to perform or abstain from a
certain act, then it is not a good consideration for a promise.

Peter receives a summons from the Court to appear before it as a witness for John. John
promises to pay him Rs 10,000 to appear in the Court. This contract is not valid because
Peter is obligated by law to appear in the Court on receiving a summons.

(vi) It cannot be Unlawful

A consideration that is against the law or public policies is not valid.

Peter offers Rs 10,000 to John to beat up his business rival. John beats him up but Peter
refuses to pay him. John cannot file a suit for recovery since the consideration is against the
law.
 Consideration
Consideration: “Something which is given and taken.”Section 2 (d) of the Contact Act
1872 defines contract as “When at the desire of the promissory, the promise or any
other person has done or abstained from doing or does or abstains from doing or
promise to do or abstain from doing. Something such act or abstinence or promise is
called a consideration for the promise.”

“When at the desire of the promissory, the promise or any other person has done or
abstained from doing or does or abstains from doing or promise to do or abstain from
doing. Something such act or abstinence or promise is called a consideration for the
Promise.”

Importance of consideration

Consideration is the foundation of ever contract. The law insists on the existence of
consideration if a promise is to be enforced as creating legal obligations. A promise
without consideration is null and void.

Types of Consideration

1. Executory,
2. Executed
3. Past consideration

Executed consideration is an act in return for a promise. If ,for example, A offers a

reward for the return of lost property, his promise becomes binding when B performs the
act of returning A’s property to him. A is not bound to pay anything to anyone until the
prescribed act is done.

Executory consideration is a promise given for a promise. If, for example, customer
orders goods which shopkeeper undertakes to obtain from the manufacturer, the
shopkeeper promises to supply the goods and the customer promises to accept and
pay for them. Neither has yet done anything but each has given a promise to obtain the
promise of the other. It would be breach of contract if either withdrew without the
consent of the other.

Past consideration which as general rule is not sufficient to make the promise binding.
In such a case the promisor may by his promise recognize a moral obligation (which is
not consideration), but he is not obtaining anything in exchange for his promise (as he
already has it before the promise is made).

Essentials of a valid consideration:

 At the desire of the promisor

 Promisee or any other person
 Consideration may be past, present or future
 Consideration must be real

Consideration must move at the desire of the promisor:

In order to constitute legal consideration, the act or abstinence forming the

consideration for the promise must be done at the desire or request of the promisor.
Thus acts done or services rendered voluntarily, or at the desire of third party, will not
amount to valid consideration so as to support a contract.

Consideration may move from the promisee or any other person:

The second essential of valid consideration, as contained in the definition of

consideration in Section 2(d), is that consideration need not move from the promisee
alone but may proceed from a third person.

Thus, as long as there is a consideration for a promise, it is immaterial who has

furnished it. It may move from the promisee or from any other person. This means that
even a stranger to the consideration can sue on a contract, provided he is a party to the
contract. This is sometimes called as ‘Doctrine of Constructive Consideration’.

Consideration may be past, present or future:

The words, “has done or abstained from doing; or does or abstains from doing; or
promises to do or to abstain from doing,” used in the definition of consideration clearly
indicate that the consideration may consist of either something done or not done in the
past, or done or not done in the present or promised to be done or not done in the
future. To put it briefly, consideration may consist of a past, present or a future act or
abstinence. Consideration may consist of an act or abstinence:

Past consideration: When something is done or suffered before the date of the

agreement, at the desire of the promisor, it is called ‘past consideration.’ It must be
noted that past consideration is good consideration only if it is given by the promisee, ‘at
the desire of the promisor Present consideration: Consideration which moves
simultaneously with the promise is called ‘present consideration’ or ‘executed
consideration’

Future consideration: When the consideration on both sides is to move at a future

date, it is called ‘future consideration’ or ‘executory consideration’. It consists of an
exchange of promises and each promise is a consideration for the other.

Consideration must be ‘something of value’: The fourth and last essential of valid
consideration is that it must be ‘something’ to which the law attaches a value. The
consideration need not be adequate to the promise for the validity of an agreement.
Free Consent
There have to be two parties to a contract, who willingly and knowingly enter into an
agreement. But how does the law determine if the parties are both these things? This is
where the concept of free consent comes in. Let us learn more about free consent and the
elements vitiating free consent.

Free Consent
In the Indian Contract Act, the definition of Consent is given in Section 13, which states that
“it is when two or more persons agree upon the same thing and in the same sense”. So the
two people must agree to something in the same sense as well. Let’s say for example A
agrees to sell his car to B. A owns three cars and wants to sell the Maruti. B thinks he is
buying his Honda. Here A and B have not agreed upon the same thing in the same sense.
Hence there is no consent and subsequently no contract.

Now Free Consent has been defined in Section 14 of the Act. The section says that consent
is considered free consent when it is not caused or affected by the following,

1. Coercion
2. Undue Influence
3. Fraud
4. Misrepresentation
5. Mistake

Elements Vitiating Free Consent

Let us take a look at these elements individually that impair the free consent of either party.

1] Coercion (Section 15)

Coercion means using force to compel a person to enter into a contract. So force or threats
are used to obtain the consent of the party under coercion, i.e it is not free consent. Section
15 of the Act describes coercion as

 committing or threatening to commit any act forbidden by the law in the IPC

 unlawfully detaining or threatening to detain any property with the intention of
causing any person to enter into a contract
For example, A threatens to hurt B if he does not sell his house to A for 5 lakh rupees. Here
even if B sells the house to A, it will not be a valid contract since B’s consent was obtained
by coercion.

Now the effect of coercion is that it makes the contract voidable. This means the contract is
voidable at the option of the party whose consent was not free. So the aggravated party will
decide whether to perform the contract or to void the contract. So in the above example, if B
still wishes, the contract can go ahead.

Also, if any monies have been paid or goods delivered under coercion must be repaid or
returned once the contract is void. And the burden of proof proving coercion will be on the
party who wants to avoid the contract. So the aggravated party will have to prove the
coercion, i.e. prove that his consent was not freely given.

Who Performs the Contract?

2] Undue Influence (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the
relations between the two parties are such that one party is in a position to dominate the
other party, and uses such influence to obtain an unfair advantage of the other party it will
be undue influence.

The section also further describes how the person can abuse his authority in the following
two ways,

 When a person holds real or even apparent authority over the other person. Or if he
is in a fiduciary relationship with the other person
 He makes a contract with a person whose mental capacity is affected by age, illness
or distress. The unsoundness of mind can be temporary or permanent
Say for example A sold his gold watch for only Rs 500/- to his teacher B after his teacher
promised him good grades. Here the consent of A (adult) is not freely given, he was under
the influence of his teacher.

Now undue influence to be evident the dominant party must have the objective to take
advantage of the other party. If influence is wielded to benefit the other party it will not be
undue influence. But if consent is not free due to undue influence, the contract becomes
voidable at the option of the aggravated party. And the burden of proof will be on the
dominant party to prove the absence of influence.
 Legality of Object and Consideration

3] Fraud (Section 17)

Fraud means deceit by one of the parties, i.e. when one of the parties deliberately makes
false statements. So the misrepresentation is done with full knowledge that it is not true, or
recklessly without checking for the trueness, this is said to be fraudulent. It absolutely
impairs free consent.

So according to Section 17,  a fraud is when a party convinces another to enter into an
agreement by making statements that are

 suggesting a fact that is not true, and he does not believe it to be true
 the active concealment of facts
 a promise made without any intention of performing it
 any other such act fitted to deceive
Let us take a look at an example. A bought a horse from B. B claims the horse can be used
on the farm. Turns out the horse is lame and A cannot use him on his farm. Here B
knowingly deceived A and this will amount to fraud.

One factor to consider is that the aggravated party should suffer from some actual loss due
to the fraud. There is no fraud without damages. Also, the false statement must be a fact, not
an opinion. In the above example if B had said his horse is better than C’s this would be an
opinion, not a fact. And it would not amount to fraud.

Performance of Reciprocal Promise

4] Misrepresentation (Section 18)

Misrepresentation is also when a party makes a representation that is false, inaccurate,
incorrect, etc. The difference here is the misrepresentation is innocent, i.e. not intentional.
The party making the statement believes it to be true. Misrepresentation can be of three
types

 A person makes a positive assertion believing it to be true

 Any breach of duty gives the person committing it an advantage by misleading
another. But the breach of duty is without any intent to deceive
 when one party causes the other party to make a mistake as to the subject matter of
the contract. But this is done innocently and not intentionally.
The last factor of mistake will be covered by the next article.

Quasi Contract
Can there be a contract without offer, acceptance, consideration, etc? Well, yes there can be
such a contract based on social responsibility. We call such contracts quasi contract. Let us
take a look.

Quasi Contract
The word ‘Quasi’ means pseudo. Hence, a Quasi contract is a pseudo-contract. When we
talk about a valid contact we expect it to have certain elements like offer and
acceptance, consideration, the capacity to contract, and free will. But there are other types of
contracts as well.

There are cases where the law implies a promise and imposes obligations on one party while
conferring rights to the other even when the basic elements of a contract are not present.
These promises are not legal contracts, but the Court recognizes them as relations
resembling a contract and enforces them like a contract.

These promises/ relations are Quasi contracts. These obligations can also arise due to
different social relationships which we will look at in this article.

The core principles behind a Quasi Contract are justice, equity and good conscience. It is
based on the maxim: “No man must grow rich out of another persons’ loss.”

Let’s look at an example of a Quasi contract: Peter and Oliver enter a contract under which
Peter agrees to deliver a basket of fruits at Oliver’s residence and Oliver promises to pay Rs
1,500 after consuming all the fruits. However, Peter erroneously delivers a basket of fruits at
John’s residence instead of Oliver’s. When John gets home he assumes that the fruit basket
is a birthday gift and consumes them.

Although there is no contract between Peter and John, the Court treats this as a Quasi-
contract and orders John to either return the basket of fruits or pay Peter.

Features of a Quasi Contract

1. It is usually a right to money and is generally (not always) to a liquated sum of money
2. The right is not an outcome of an agreement but is imposed by law.
3. The right is not available against everyone in the world but only against a specific
person(s). Hence it resembles a contractual right.
Sections 68 – 72 of the Indian Contract Act, 1872 detail five circumstances under which a
Quasi contract comes to exist. Remember, there is no real contract between the parties and
the law imposes the contractual liability due to the peculiar circumstances.

Source: Pixabay

Section 68 – Necessaries Supplied to Persons Incapable of Contracting

Imagine a person incapable of entering into a contract like a lunatic or a minor. If a person
supplies necessaries suited to the condition in life of such a person, then he can get
reimbursement from the property of the incapable person.

John is a lunatic. Peter supplies John with certain necessaries suited to his condition in life.
However, John does not have the money or sanity and fails to pay Peter. This is termed as a
Quasi contract and Peter is entitled to reimbursement from John’s property.
However, to establish his claim, Peter needs to prove two things:

1. John is a lunatic
2. The goods supplied were necessary for John at the time they were sold/ delivered.
Section 69 – Payment by an Interested Person

If a person pays the money on someone else’s behalf which the other person is bound
by law to pay, then he is entitled to reimbursement by the other person.

Peter is a zamindar. He has leased his land to John, a farmer. However, Peter fails to pay the
revenue due to the government. After sending notices and not receiving the payment, the
government releases an advertisement for sale of the land (which is leased to John).
According to the Revenue law, once the land is sold, John’s lease agreement is annulled.

John does not want to let go of the land since he has worked hard on the land and it has
started yielding good produce. In order to prevent the sale, John pays the government the
amount due from Peter. In this scenario, Peter is obligated to repay the said amount to John.

Section 70 – Obligation of Person enjoying the benefits of a Non-Gratuitous Act

Imagine a person lawfully doing something or delivering something to someone without the
intention of doing so gratuitously and the other person enjoying the benefits of the act done
or goods delivered. In such a case, the other person is liable to pay compensation to the
former for the act, or goods received. This compensation can be in money or the other
person can, if possible, restore the thing done or delivered.

However, the plaintiff must prove that:

 The act that is done or thing delivered was lawful

 He did not do so gratuitously
 The other person enjoyed the benefits
Section 71 – Responsibility of Finder of Goods

If a person finds goods that belong to someone else and takes them into his custody, then he
has to adhere to the following responsibilities:

 Take care of the goods as a person of regular prudence

 No right to appropriate the goods
 Restore the goods to the owner (if found)
Peter owns a flower shop. Olivia visits him to buy a bouquet but forgets her purse in the
shop. Unfortunately, there are no documents in the purse to help ascertain her identity. Peter
leaves the purse on the checkout counter assuming that she would return to take it.

John, an assistant at Peter’s shop finds the purse lying on the counter and puts it in a drawer
without informing Peter. He finished his shift and goes home. When Olivia returns looking
for her purse, Peter can’t find it. He is liable for compensation since he did not take care of
the purse which any prudent man would have done.

Section 72 – Money paid by Mistake or Under Coercion

If a person receives money or goods by mistake or under coercion, then he is liable to repay
or return it.

Let us see an example. Peter misunderstands the terms of the lease and pays
municipal tax erroneously. After he realizes his mistake, he approached the municipal
authorities for reimbursement. He is entitled to be reimbursed since he had paid the money
by mistake.

Similarly, money paid by coercion which includes oppression, extortion or any such means,
is recoverable.