ESSENTIALS OF VALID CONTRACT

Essentials of contract

A contract is only legal if it is binding by law and has all of the following parts listed in Section 10 of the Indian Contract Act.

1. Two Parties: A legal contract must have at least two parties: the person who makes the offer and the person who does not accept the offer in order for the contract to be valid.
2. Legal Obligation: The people who sign a contract must believe they are taking on a legal responsibility. A social agreement or duty is not a contract because it doesn’t make anyone legally obligated to do anything.
3. Certain Terms: A formal contract must be clear about what it means. Example: A agrees to pay a fair price for B’s house. In order for the contract to be legal, it must say exactly how much A plans to pay B for his house.
4. Potential for Performance: A contract is only effective if it doesn’t call for doing something that can’t be done. Example: A makes a deal with B to bring B’s father back to life in exchange for 10,000 rupees. Because the Contract calls for doing something that can’t be done, it is not a legal Contract.
5. Signing a Contract: Both sides must freely agree to the terms of the contract.
6. Competency: In order to make a contract, both sides must be able to properly do so. People who are competent to sign a contract are those who are of sound mind, have reached the legal age of majority, and are not legally prohibited from doing so (for example, a prisoner, an enemy alien, a foreign national, etc.). This is specified in Section 11 of the Indian Contract Act.
7. Consideration: The contract must include something of value in exchange for something else, and this is called “quid pro quo.” There must be something of value as “consideration” in order for a contract to be legal.
8. Legal Consideration: According to Section 23 of the Contract Act, a legal consideration is anything that is not against the law.

CLASSIFICATIONS OF CONTRACTS

(A) Based on the idea of how it formed

A contract can be broken down into four parts based on how it was made, negotiated, and used.

1. Express contract: As the name suggests, an “Express Contract” is one in which the terms of the agreement are clearly stated by both parties at the time the agreement is made.
2. Implied contract: A contract is any set of promises that are legally binding and are made in exchange for something of value. Contracts can be categorized by how true they are, how they were made, and how they are carried out. If a promise or acceptance is made without words, Section 9 of the Indian Contract Act calls it a “Implied Contract.” This is if a contract can be inferred from the behavior of the parties or from criticism.
3. Quasi Contract: A “quasi contract” is any agreement made by the law or forced by the law to do or not do something.
4. E-Contract: “E-Contracts” are agreements made through electronic means, such as websites and emails.

(B) Based on Validity

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Once the contract is binding, we can make it clear in five different ways.

1. Valid Contract: A “Valid Contract” is any contract that meets all the legal standards set out in the Contract Act. The Indian Contract Act, Section 10, says what a valid contract is.
2. Void Contract: A “Void Contract” is any agreement that can be enforced by law.
3. Voidable Contract: A “Voidable Contract” is an agreement that can be enforced by law if one or more of the parties chooses to do so, but not if the others choose to do so.
4. Illegal Contract: An “illegal contract” is any agreement that is against the law.
5. Unenforceable Contract: An “unenforceable contract” is an agreement that is legal but can’t be enforced by the state.

(C) Based on performance

Based on performance, we can divide contracts into four groups:

1. Execute Contract: An “execute contract” is one in which both sides have to carry out all of their duties.
2. Executory Contract: An “executory contract” is one in which both sides still have to carry out their duties.
3. Unilateral Contract: A “unilateral contract” is a one-sided agreement where only one person has to follow through on all of their duties.
4. Bilateral Contract: A “Bilateral Contract” is one in which both parties agree to keep their promises and obligations.