At the heart of most professional or business relationships is a contract.

A contract can be
defined as an agreement between parties that creates a set of specific obligations that must be
fulfilled by the parties involved in accordance with the law (Collins, 2008). To put it another
way, it’s the official document that cements all the obligations, rights, and duties of the parties
involved (Pratt, 2000). Therefore a contract is an agreement between two or more parties
which is enforceable by the law. 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 US200. 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:
•A father promises to pay his son US$200 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.
• A offers to sell his watch to B for US$200 and B agrees to buy it at the same price, there is a
contract as it creates legal-relationship between them. `
• A husband promised to pay his wife a household allowance of US$30 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.”iiiiiì 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:
•A agrees to sell his house to B for US$10000 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 $10 000.
These are lawful considerations
•A promise to obtain for B employment in the public service, and B promise to pay US$10,000
to A. The agreement is void, as the consideration for it is unlawful.
4. Capacity of Parties:
According to Meyer (2010) 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:
•M, a person of unsound mind, enters into an agreement with S to sell his house for US $5. It is
not a valid contract because M is not competent to contract.
•A, aged 20 promises to sell his car to B for US$3. 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: 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 US$5000 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 because 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:

• A verbally promises to sell his book to Y for $200. It is a valid contract because the law does
not require it to be in writing.
•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:
• 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.
• 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.
•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. Nel (2004) says,
“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:
•A agrees with B to discover treasure by magic, the agreement is not enforceable.
•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 byway of wager have been
expressly declared void. Example:
A promise to close his business against the promise of B to pay him US$100 is a void
agreement because it is restraint of trade.
Conclusion
Contracts are an essential element of businesses, so making sure they are compliant and in
order is critical to the organization’s success. Keeping all these elements in mind while
reviewing a contract will go a long way towards ensuring all legal requirements are met, so that
all contracts are binding and actionable.

References:
Collins, H. (2008). Standard contract terms in Europe. Alphen Aan Den Rijn: Kluwer Law
International.
Meyer, L. (2010). Non-performance and remedies under international contract law principles
and Indian contract law. Frankfurt am Main: P. Lang.
Nel, J. (2004). The theoretical basis for contractual liability. Bathurst, N.S.W.: Faculty of
Commerce, Charles Sturt University.
Pratt, S. (2000). Duty of care. East Roseville, N.S.W.: Simon & Schuster.