Essential Elements of a Contract
A contract is the heart of most professional relationships. A contract is legally enforceable when it fulfills all the criteria of essential elements of a valid contract. It ensures that if one party fails to do what he or she has agreed to do, the other party can then proceed to court as a result of violation of the terms of the contract. However, a contract can be considered valid only if it satisfies certain essential terms and conditions under Indian Contract Act, 1872:
1. Offer: There must be an intent to initiate an offer and negotiate a contract under certain conditions.
2. Acceptance: The other party accepts the offer and the acceptance in return leads to the creation of an agreement.
3. Consideration: An exchange of value between two or more parties such as money, services, or promise. For a contract to be legally enforceable, each party must provide something of value to form a consideration.
4. Legal Capacity: Both parties to the contract must be legally competent to enter into a contract. This means that they must be of legal age.
5. Intent: Both parties must have intentions to create legal obligations. Casual promises & social agreements are generally not legally binding and are unenforceable in a court of law.
6. Legal Purpose: The scope of the contract & the activities covered by it shall not be unlawful to public policy. Generally, contracts involving unlawful activities are contrary to the law and are void.
7. Certainty & Possibility of Performance: The contract should contain terms & conditions that are clear & unambiguous and the agreed actions should be feasible to carry out.