WHAT IS A CONTRACT?

Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreementenforceable by law.

Section 2(e) defines agreement as every promise and every set of promisesforming consideration for
each other.

Section 2(b) defines promise in these words: When the person to whom theproposal is made signifies
his assent thereto, the proposal is said to be accepted. Aproposal when accepted becomes a promise.

From the above definition of promise, it is obvious that an agreement is an acceptedproposal.

ESSENTIAL ELEMENTS OF A VALID CONTRACT

We have seen above that the two elements of a contract are: (1) an agreement; (2)legal obligation.
Section 10 of the Act provides for some more elements which are essentialin order to constitute a valid
contract. It reads as follows: All agreements are contracts if they arc made by free consent of parties,
competent to contract, for a lawful considerationand with a lawful object and are not hereby expressly
declared to be void.

Thus,

the

essential elements of a valid contract

can be summed up as follows1. Agreement.2. Intention to create legal relationship.3. Free and genuine
consent.4. Parties competent to contract.5. Lawful consideration.6. Lawful object.7. Agreements not
declared void or illegal.8. Certainty of meaning.9. Possibility of performance.10. Necessary Legal
Formalities.

VOIDABLE CONTRACTS
Only legally enforceable agreement is a contract.

Definition

:- An agreement which is enforceable by law at the option of one or more of the parties thereto, but not
at the option of the other or others, is a voidable contract. [sec. 2(i)].(a)When consent is obtained by
coercion, undue influence, misrepresentation or fraud is voidable at the option of aggrieved party i. e.
party whose consent was obtained by coercion/fraud etc. However, other party cannot avoid the
contract.(b)When a contract contains reciprocal promises and one party to contract prevents the other
from performing his promise, the contract becomes voidable at the option of the party to prevented.(
Sec 53). Obvious principle is that a person cannot takeadvantage of his own wrong.(c)When time is
essence of contract and party fails to perform in time, it is voidable atthe option of other party(Sec. 55).
A person who himself delayed the contract onaccount of his own delay.A voidable contract is valid and
enforceable, unless the party who is entitled to avoid itactually does so. The aggrieved party can claim
compensation for loss or damages.However, if it has obtained some benefits, it should be restored to
another party. Even if contract is voidable (but not illegal), collateral transaction will not be affected i.e.
collateraltransaction will be valid.A voidable contract, unlike avoid contract, is a validcontract. At most,
one party to thecontract isbound. The unbound party may repudiate the contract, at which time
thecontract isvoid.For example, depending upon jurisdiction, aminor has the right to repudiate
certaincontracts. Any contract with a minor is thus a voidable contract. If a minor were to enter intoa
contract with an adult, the adult would be bound by the contract, whereas the minor couldchoose to
avoid performing the contract. Therefore, when entering into contracts with a

minor, people often require theco-signatureof an adult, preferably aparentor legalguardian.A contract
may be voidable on the grounds of Fraud,mistake,Misrepresentation,lack of capacity, duress,Undue
Influence, or abuse of a fiduciary relationship. A contractthat is based on one of these grounds is not
automatically void but is voidable at the optionof the party entitled to avoid it. For example, a person
who was induced by fraud to enter into a contract may disclaim the contract by taking some positive
action to disaffirm thecontract. Or the victim of the fraud may ratify the contract by his or her conduct
or by anexpress affirmation after acquiring full knowledge of the facts. Likewise, a contract betweena
minor and another party is generally viewed as voidable by the minor. The minor maylegally decide to
ratify the contract or disaffirm the contract.