Discus the essential of a valid contract
Answers
1] Two Parties
So you decide to sell your car to yourself! Let us say to avoid tax or some other sinister purpose. Will that be possible? Can you have a contract with yourself? The answer is no, unfortunately. You can’t get into a contract with yourself.
A Valid Contract must involve at least two parties identified by the contact. One of these parties will make the proposal and the other is the party that shall eventually accept it. Both the parties must have either what is known as a legal existence e.g. companies, schools, organizations, etc. or must be natural persons.
For Example: In the case State of Gujarat vs Ramanlal S & Co. – A business partnership was dissolved and assets were distributed among the partners as per the settlement. However, all transactions that fall under a contract are liable for taxation by the office of the State Sales Tax Officer. However, the court held that this transaction was not a sale because the parties involved were business partners and thus joint owners. For a sale, we need a buyer (party one) and a seller (party two) which must be different people.
2] Intent Of Legal Obligations
The parties that are subject to a contract must have clear intentions of creating a legal relationship between them. What this means is those agreements that are not enforceable by the law e.g. social or domestic agreements between relatives or neighbors are not enforceable in a court of law and thus any such agreement can’t become a valid contract.
3] Case Specific Contracts
Some contracts have special conditions that if not observed would render them invalid or void. For example, the Contract of Insurance is not a valid contract unless it is in the written form.
Similarly, in the case of contracts like contracts for immovable properties, registration of contract is necessary under the law for these to be valid.
4] Certainty of Meaning
Consider this statement “I agree to pay Mr. X a desirable amount for his house at so and so location”. Is this a valid contract even if all the parties agree to this term? Of course, it can’t be as “desirable amount” is not well defined and has no certainty of meaning. Thus we say that a valid contract must have certainty of Meaning.
5] Possibility Of Performance Of an Agreement
Suppose two people decide to get into an agreement where a person A agrees to bring back the person B’s dead relative back to life. Even when all the parties agree and all other conditions of a contract are satisfied, this is not valid because bringing someone back from the dead is an impossible task. Thus the agreement is not possible to be enforced and the contract is not valid.
6] Free Consent
Consent is crucial for an agreement and thus for a valid contract. If two people reach a similar agreement in the same sense, they are said to consent to the promise. However, for a valid contract, we must have free consent which means that the two parties must have reached consent without either of them being influenced, coerced, misrepresented or tricked into it. In other words, we say that if the consent of either of the parties is vitiated knowingly or by mistake, the contract between the parties is no longer valid.
7] Competency Of the Parties
Section 11 of the Indian Contract Act, 1872 is:
“Who are competent to contract — Every person is competent to contract who is (1) of the age of majority according to the law to which he is subject, and who is (2) of sound mind and is (3) not disqualified from contracting by any law to which he is subject.”