A valid contract is binding and enforceable. In a valid contract, all the parties are legally bound to perform the contract. thus, a contract can be enforced by either of the parties. if one party refuses to perform the contract, the other can enforce it through court. to be enforceable, an agreement must possess the essentials of a valid contract.
According to section 10, "all agreements are contracts if they are made by the free consent of parties, competent to contract, for a lawful consideration and with a lawful object, and are not herby expressly declared to be void. where necessary, the agreement must satisfy the requirements of law regarding writing, attestation or registration."
The essential of a valid contract are as follows:
1 offer and acceptance:
For an agreement, there must be a lawful offer by one party and lawful acceptance of that offer by the other party. The term lawful means that the offer and acceptance must satisfy the requirements of contract Act.
Example:
A offers to sell his car to B for Rs. 3000. This is an offer. if B accepts this offer, there is an acceptance.
2-Legal obligation:
The parties to an agreement must create legal obligations. It means that if one party does not fulfill his promise, he shall be liable for breach of contract. it is presumed in commercial agreements that parties intend to create legal relations.
Examples:
- A offers to sell his watch to B for Rs 200. B agrees to buy. it is a contract as it creates legal obligation.
- A husband promised to pay his wife an allowance of $40 every month. Later, the parties separated and the husband refused to pay. the wife sued. Held, that the wife was not entitled as agreement did not create legal obligations. (Belfour vs. Belfour)1.
3-Lawful consideration:
For a valid contract, consideration should be lawful. Consideration is the price paid by one party for the promise of other party. An agreement is enforceable only when both the parties gives and take some things. That some thing given or taken is called consideration.
Examples:
- A agrees to sell his house to B for Rs.8 lac. For A Rs 8 lac is the consideration and for B house is the consideration.
- A promises B to get him a government job and B promises to pay Rs 2 lac. The agreement is void as the consideration is unlawful.
4-capacity of parties:
An agreement is enforceable if it is made by parties who are competent to contract. To be competent to contract, it is essential that the parties are of the age of majority, have sound mind and are not disqualified from contracting by law. Contract by a person of unsound mind, non mature and the person disqualified from contracting by the law are void ab-initio (from the beginning).
Examples:
- M, a person of unsound mind agrees to sell his house to N for Rs 4 lac. It is not a valid contract because M is not competent to contract.
- A, aged 20 promises to sell his car for Rs 5 lac. It is a valid contract because A is competent to contract.
5- Free consent:
For a contract, it is essential that the consent of parties must be free. Consent is free when it is not obtained by coercion, undue influence, fraud, misrepresentation or mistake. If the consent of either of the parties is not free, the agreement can not become a contract. (Sec. 14)
Example:
A compels B to enter into a contract at gunpoint. It is not a valid contract as the consent of B is not free.
6-Lawful object:
It is necessary that agreement is made for a lawful object. The object of agreement must not be fraudulent, illegal, immoral, opposed to public policy, imply injury to the person or property of another. Every agreement with unlawful object or consideration is illegal and therefore void. (Sec.23).
Examples:
- A, promises to pay B Rs. 4,000 if B beats C. the agreement is illegal as its object is unlawful.
- A hires a house to use for gambling. The object of the agreement is unlawful, so the agreement is illegal and void.
7- Writing and registration:
A contract may be oral or in writing. It is preferable that the contract be in writing because it is easy to prove n court. If required by law. A particular contract must be in writing, signed, attested by witnesses and registered; e.g. sale and mortgage of land.
Examples:
- W verbally promises to sell his book to Z for Rs 300. it is a valid contract because the law does not require it to be in writing.
- A verbally promises to sell his two houses to F. is not a valid contract because the law requires it to be in writing.
8- Certainty of terms:
According to section 29, “agreements, the meaning of which is not certain or capable of being certain, are void.” The term of an agreement must be clear, complete and certain. If the terms are uncertain, the agreement is void.
Examples:
- A promise to sell 40 books to Q with out specifying their titles. The agreement is void because the terms are not clear.
- G agreed to purchase a van from T. 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 (Scammel vs. Ouston).
9- Possibility of performance:
A valid contract must be capable to being performed. An agreement to do an impossible act is void. If the act is legally or physically impossible to perform, the agreement can not be enforced by law. (Sec.56)
Examples:
- A agrees with E to discover a treasure by magic, the agreement is not enforceable.
- X agrees with Y to put life in dead brother of Y. The agreement is void as it is impossible to perform.
10- Not expressly declared void:
The agreement must not be one of those agreements which have been expressly declared to be void by the law. Sections 24-30 explain certain agreements which have been expressly declared to be void, e.g. agreement in restraint of trade and wager etc. are expressly declared void.
Examples:
- J promises to close his business on the promise of K to pay him Rs 5 lac is a void agreement because it is in restraint of trade.
- A promise to pay Rs 5,000,000 If Pakistan wins the world cup final. The agreement is void being a wagering agreement.