ESSENTIALS OF A VALID CONTRACT

1.Plurality of persons:
Plurality means more than one person . Every contract should have minimum 2 persons to enter. A
person cannot enter into contract with himself.
2. There must be an Offer and its Acceptance:
In an agreement there must be an at least two parties, one of them making the offer and the other
accepting the offer. Each of the parties are obligated to perform the contract
Example: Mr. A agrees to sell is car to Mr. B and B agrees to purchase it for Rs. 1,00,000. this
agreement has both a offer and acceptance. It gives an obligation on part of A to deliver the car and on
part of B to pay the price of a car. Hence there is offer and an acceptance.
3. Intention to create legal relationship:
An agreement must create legal relationship (i.e., an obligation which is enforceable by law). Once an
offer has been accepted, there is an agreement, but not a contract. An agreement becomes a contract
only when there is "intention to create legal relations". Parties should know that the agreement will be
legally binding on them. For this reason social agreements and domestic agreement are not considered
contracts.
For eg-Ex; - A invited B to a dinner. B accepted the invitation. It is a social agreement. If a fails to
serve dinner to B, he(B) cannot go to Courts of law for enforcing the agreement. Similarly, if B fails
to attend the dinner, A cannot go to court of law.
4. Lawful Consideration.
Consideration means a benefit moving from one party to another. In simple word it means something
in return (quid pro quo). The agreement is legally enforceable when both the parties give something
and get something in return. Lawful consideration is that which is not immoral or fraudulent and not
opposed to public policy.
Ex: - A promised to obtain an employment for B in a Government Department and B agreed to pay
Rs. 10000 to A. In this case, the agreement is not valid as the consideration of it is unlawful.
5. There must be mutual consent & free consent of the parties:
The parties to an agreement must have the mutual consent (i.e., they must agree upon the same thing
on the same sense). This means that there must be consensus ad idem (i.e., meeting of minds).
Ex; - A owned two horses, one black and another white. He offered to sell one horse to B. While
making the offer, A had the black horse in mind. But B accepted the offer, thinking that it was made
for white horse. In this case, there is no consensus ad idem, as the parties did not agree upon the same
thing in the same sense. Thus, no agreement.
6. Free Consent-
The contract must have been made with free consent of the parties. It may be noted that the consent is
free, when it is not obtained by coercion, undue influence, fraud, misrepresentation or mistake etc. If
the consent of the parties is not free, then no valid contract comes into existence.
Ex: - A threatened to shoot B’s son unless B signs a promissory note for Rs. 20000 in favor of A. B
signed the promissory note under the threat. In this B’s consent is not free as it is obtained under
pressure therefore the promissory note is not valid.
7 he parties must be competent to contract:
The parties to an agreement must be competent to contract. In other words, they must be capable of
entering into a contract. It may be noted that minors, or persons of unsound mind are not competent to
contract. If the parties are not competent to contract then no valid contract .
Ex: - A, a minor, borrowed Rs. 500 from B and agreed to repay it within two months. This is not a
valid contract as A is not competent to contract.
7. Agreement not declared void
The agreement must not have been expressly declared void by law in force in the country. For
example any agreement with enemy country is declared void. Agreement in restraint of trade is void.
8.The agreement must be certain:
The meaning of the agreement must be certain. In other words, an agreement whose meaning is not
certain is not valid.
Ex: - A agreed to sell to B “a hundred tons of oil”. Here it is not clear what kind of oil is intended to
be sold. In this case agreement is not valid because it not certain.
9.The performance must not be impossible:
The performance of the contract must be possible. An agreement to do an impossible act is not valid.
Ex: - A agreed to discover the 1000rs by magic. In some cases, the performance is possible, and in
some cases, performances are not possible, then contract is not valid.
10. Legal Formalities:
• Agreements may be oral or written.
• But the contract Act have prescribed certain legal formalities to be complied with in certain types of
agreements. Such as:
• Agreement should be in writing.
• Some agreements should be registered.
• In some cases, the documents should be stamped and attested.
• If these aren’t complied then they can’t be enforceable.
REMEDIES FOR BREACH OF CONTRACT
When the aggrieved person is taken back to the position that they were enjoying before their rights
were infringed, they are said to have been provided with a legal remedy. There are various types of
legal remedies.

1] Recession of Contract
When one of the parties to a contract does not fulfil his obligations, then the other party can rescind
the contract and refuse the performance of his obligations. For example, imagine a contract to provide
catering services for an event. The contract requires the other party to pay half the contract price by a
certain date, but they never pay. Since payment goes to the heart of the contract, in rescinding the
contract would be justified and refusing to provide the catering services.
For example, A promises to supply the furniture B's new office on a certain day. B promises to pay
for the furniture on its receipt. A does not supply the furniture on the agreed date. B is discharged
from the liability of paying the price and can rescind the contract.

2] Sue for Damages

Under the Indian Contract Act, 1872, Section 73 and Section 74 provide for unliquidated and
liquidated damages respectively.
Unliquidated Damages are the damages awarded by the courts on the basis and assessment of actual
loss or injury caused to the party suffering breach of contract.
Whereas, Liquidated Damages are the damages which the parties to the contract may agree to, as
payment of a certain amount on the breach of contract.

3] Sue for Specific Performance

Specific performance is a type of remedy for breach of contract in which a court orders the breaching
party to perform and complete his duties under the contract.
When damages are not an adequate remedy for the breach of contract then court may order specific
performance. When the contract is unique and cannot be replaced then specific performance may be
orded by court.
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 a court order restraining(stopping) a person from doing a particular act.
Injunctions serve a similar purpose as specific performance. The difference is that with specific
performance, the court orders a party to do something.
With an injunction, the court often orders a party not to do something. Injunctions are often granted
when monetary damages are not sufficient to remedy a given situation.
For example, an industrial plant dumping waste into a lake may be served an injunction to stop that
activity. An injunction may be permanent or temporary
5] Quantum Meruit
means “what one has earned” or “as much as he has earned”. In simpler terms, it refers to the actual
value of the services rendered or performed.
When a person has done some work under the contract, or some event happens which makes the
further performance of the contract impossible, then the party who has performed the work can claim
remuneration for the work he/she has done. That is called quantum meruit.
When a contract is divisible and the party in default has enjoyed the benefit of the partial performance
then aggrieved party can claim quantum meruit.