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Contract Act Notes 2


Essential Elements of Contract and Free Consent under Indian Contract Law

1. Introduction to Contract Law

A contract as per Section 2(h) of the Indian Contract Act, 1872, is “an agreement enforceable by law.” It is a foundational pillar of commercial and social relations, facilitating legally binding promises and cooperation between parties. Understanding the essential elements of a valid contract and the importance of free consent is crucial to determine enforceability and protect parties from unfair practices.

2. Essential Elements of a Valid Contract

For an agreement to become a legally enforceable contract, the following key essential elements must be present:

2.1 Offer and Acceptance (Sections 3 to 9)

  • Offer (Proposal): A clear, definite, and communicated proposal made by one party showing willingness to contract on certain terms.

  • Acceptance: An unconditional assent to the terms of the offer by the offeree communicated to the offeror.

  • Mutual consent: The “meeting of minds” or consensus ad idem where both parties agree on the same terms.

Example: A offers to sell his car for ₹5,00,000. B accepts the offer without modifications. This constitutes a valid offer and acceptance.

2.2 Intention to Create Legal Relations

  • The parties must intend that their agreement results in a legal obligation enforceable by law.

  • Social or domestic agreements generally lack this intention, unlike business agreements.

2.3 Lawful Consideration (Section 2(d))

  • Consideration is something in return for a promise, which must be lawful, real, and possible.

  • It may be money, goods, services, or a forbearance.

  • Illegal, immoral, or impossible consideration invalidates the contract.

2.4 Lawful Object

  • The purpose of the contract must be lawful and not forbidden by law or against public policy.

  • Contracts with illegal or immoral objects are void.

2.5 Competency of Parties (Section 11)

  • Parties must be competent to contract.

  • Competency requires being of the age of majority, sound mind, and not disqualified by law.

  • Contracts by minors, persons of unsound mind, or disqualified persons are void or voidable.

2.6 Free Consent (Sections 13-22)

  • Consent must be free and genuine.

  • It should not be caused by coercion, undue influence, fraud, misrepresentation, or mistake.

  • Contracts without free consent are voidable at the option of the party whose consent was obtained improperly.

2.7 Possibility of Performance

  • The terms must be capable of performance.

  • Agreements involving impossible acts are void.

2.8 Certainty and Possibility

  • Terms of the contract must be certain, clear, and not vague.

  • Subject matter must be capable of being performed.

3. Free Consent: Detailed Discussion

Consent forms the core of contractual validity. When consent is not free, the contract’s enforceability is undermined.

The Indian Contract Act devotes specific sections to elucidate various factors vitiating free consent:

3.1 Coercion (Section 15)

  • Definition: Coercion means committing or threatening to commit violence or unlawful restraint to influence consent.

  • Effect: Consent obtained through coercion is not free; contract is voidable.

  • Example: Threatening harm if one refuses to agree.

3.2 Undue Influence (Section 16)

  • Occurs when one party dominates the will of the other due to a fiduciary or dependent relationship.

  • Influence is undue if it substitutes the will of the dominant party for that of the influenced party.

  • Effect: Contract is voidable at the option of the influenced party.

3.3 Fraud (Section 17)

  • Fraud involves deliberate deception to induce a party to enter into a contract.

  • Includes false statements, concealment of facts, or acts intended to deceive.

  • Effect: Contract voidable; injured party may rescind contract and claim damages.

3.4 Misrepresentation (Section 18)

  • False statement made innocently without intent to deceive.

  • Induces other party to contract.

  • Effect: Contract voidable, but no damages unless fraudulent.

3.5 Mistake (Sections 20-22)

  • Mistake of Fact: Mutual mistake about a fact essential to the agreement renders contract void.

  • Mistake of Law: Generally, mistake of law does not render a contract void.

  • Unilateral Mistake: When only one party is mistaken, generally contract is valid unless other party knows and acts unfairly.

4. Void Agreements (Section 2(g) and Section 10)

  • An agreement not enforceable by law is void.

  • Agreements with unlawful consideration or objects.

  • Agreements made without free consent.

  • Agreement restraining legal proceedings.

  • Agreements in restraint of trade.

  • Wagering agreements.

5. Case Law Illustrations

Coercion

  • Chikkam Ammiraju v. Pollnoor Ramachandra Rao (1903): Threats induced consent held void.

Undue Influence

  • Allcard v. Skinner (1887): Relationship of trust and domination found undue influence.

Fraud

  • Derry v. Peek (1889): Definition and consequences of fraud.

Misrepresentation

  • Redgrave v. Hurd (1881): Innocent misrepresentation allowed rescindment.

Mistake

  • Bell v. Lever Brothers (1932): Mistake must be fundamental to void contract.

6. Conclusion

A valid contract under the Indian Contract Act, 1872 requires a clear offer and acceptance, lawful consideration and object, competent parties, and most critically free consent. Any vitiation of consent through coercion, undue influence, fraud, misrepresentation, or mistake leads to voidable or void agreements, protecting weaker parties and promoting fairness and equity in contractual dealings.

These legal principles protect the sanctity of contracts and ensure that obligations are voluntarily and knowingly undertaken. This framework is essential in maintaining justice, commercial reliability, and legal certainty in civil and commercial law.

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