Valid contracts are basically, the contracts which are enforceable by law. We know that all contracts are agreements but not all agreements are contract. Therefore we also have a set of essential conditions to distinguish between the two. There are various essentials of a valid contract:
- The essentiality of a lawful offer and a lawful acceptance.
- There should be an Intention to establish a legal relation among the parties when getting into a contract.
Reference: Balfour vs. Balfour (1919) is a case related to this essentiality of the valid contract.
- Competency of the parties is one of the major essentials. This is given in the section 11 of the Indian Contract Act, 1872 that any person who is a major according to the law, is of sound mind and is not disqualified by any law is qualified enough to get into a contract. Section 12 of the same explains the various conditions of having a sound/unsound mind.
- Free consent: Section 14 of the Indian Contract Act, 1872 explains the term “free consent”. Anyone who is free of :
- Coercion Section 15
- Undue influence Section 16
- Fraud Section 17
- Misrepresentation Section 18
- Mistake Section 20,21,22
is free to get into a contract.
If the agreement is about any object which is illegal/unlawful according to the law, then the agreement is void.
- The agreement should not be void under section 24 to section 30 of the Indian Contract Act, 1872.
- SECTION 29 (Uncertain agreements)
According to the section 29, “Agreements, the meaning of which is not certain, or capable of being made certain, are void.” These are those agreements which may/may not happen. These events are uncertain. The parties cannot rely on it.
For example:
A agrees to sell his television to B for a sum of Rupees Twenty Two Thousand Thousand of Rupees Twenty Thousand. Here, the uncertainty of the sum plays a role. None of the parties can make a certain agreement through it.
2.1. Famous cases
Keshavlalbhai vs lalbhai
(A.I.R1958S.C.512):
In this particular case, the Mill was closed due to the workers being on a strike because of the quit India movement. A letter was sent to the appellants stating “entire working of our mill is closed…. Under the circumstances, please note that the delivery time of all your pending contracts with us shall be automatically understood as extended for the period the working is stopped and till the normal state of affairs recur” The extension of the time asked for, was so uncertain that the agreement shall be considered void.
D.D.A. Vs. Joint action committee
(A.I.R.2008S.C.1343):
It was another case of the uncertainty of agreement as price plays a very important role. A definite price is needed whenever an agreement has to come into being.
3. SECTION 30 (Agreement by way of wager)
- According to the Section 30 of the Indian Contract Act, 1872, -Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.
- Exception in favour of certain prizes for horseracing .- This Section shall not be deemed to render unlawful contribution, or agreement to subscribe or contribute, made or entered into for or toward any place, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horserace.
- SECTION 294-(A) of Indian Penal Code not affected.- Nothing in this Section shall be deemed to legalize any transaction connected with horse racing, to which the provisions of the apply.
In very simple terms, a wager is a formal term for a bet. The Indian Contract Act does not define a wagering agreement. The nature of such an agreement was explained in the reference case.
Reference case: Brahm Dutt
There are certain essentials for a wagering agreement .Now you need to compare this to a random bet between two people and it’s really easy to understand the essentials.
- Parties with opposite views about any uncertain event: If there is a football match between Argentina and Portugal and you are supporting Argentina, you being an Argentina supporter. On the other hand, your roommate is quite sure about Brazil winning the match. Then starts a friendly argument and ends up with you agreeing to pay your roommate Rs.1000 if Brazil wins and being paid Rs.1000 if Argentina wins.
- This kind of an agreement is a wagering agreement. Also, known as bet in the normal circumstances.
- No interest in anything other than stake: The parties in this case, are not concerned with anything but the money that is on stake. There is no other consideration available with the parties other than the stake.
- Chances of win and loss: In this case the chances of gains or loss to the party is equivalent. The probability of winning is 50% and same goes with the loss.
4. Section 36 (Agreements contingent on impossible events)
- Section 31 of the Indian Contract Act, 1872 explains the concept of contingent contract. According to Section 31 of the Indian Contract Act, 1872,-A”contingent contract” is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. This means when a contract is totally dependent on the fact if a certain event ii about to take place anytime in the future or not.
- For example, if A is an insurance company and has agreed to pay a sum of rupee 10,000 to B if B’s car crashes. This kind of a contract where both the parties are not sure if the future event will ever take place or not is called a Contingent contract.
- Section 36 of the same, talks about the Agreements contingent on impossible event. If any contract to do or not do anything impossible happens the contract is said to be a void contract.
Reference cases:
1. K K Khadilkar Vs. Indian Hume Pipe Co. Ltd (AIR1967)
2. Modi Rubber Ltd. Vs. Guardian International Co
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