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INDEX

Sr. No Content Page No.

1 Introduction – Historical Evolution of Contract Law 3

2 Evolution of Contract Law Different time periods 3-5

3 The Advent of The Indian Contract 6

4 Conclusion 7

5 Introduction – Essentials of a Valid Contract 8

6 Case Law – Lalman Shukla Vs. Gauri Dutt 9 - 13

7 Related Cases - Gibbons v. Proctor (1891) 13

8 Case Citations 13- 14

9 Lawful Consideration & types of Consideration 15

10 Case Law - Mohori Bibee Vs. Dharmodas Ghose 16

11 The doctrine of Promissory Estoppel 16-18

Conclusion of basic elements of Formation of Contract &

12 18-21
explaination

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Contract Law is a form of civil law.

Introduction – Historical Evolution of Contract Law

Contract act is one of the principal acts governing all the contractual relations not only in
the business world but also from day to day life. It is one of the most important legislation ever
drafted by Britishers and the principles enacted therein are nothing but the codification of the
general principle governing transactional relationship because of which it has seen seldom
amendments.
The basic principle of contract law remained the same throughout the world only certain
technicalities remain different. Before the act was enacted, the contractual relationship was
governed by the personal laws of different religious communities like different laws for Hindus
and Muslims.
Also at that time, British had their own law to govern to, but because of the presence of
so many divergent laws, it created confusion in implementation of the contract & in case, of if
any dispute arises between the parties. So to promote business transactions, contract act was
enacted to make business transactions more convenient.
Now, to understand the contract act in its present form we have to analyze the historical
evolution of contract law taking into account the practices that were prevalent before the
enactment came into practice. We shall be mainly analyzing the Rome Period (to understand
Common Law Principle), Muslim Period, Hindu Period, British Regime and the Present
Enactment.
I. Evolution of Contract Law Different time periods
A. Roman period
The earliest common law principle to contract law can be traced back during the Roman Empire,
where twelve tables were the law. At that time there exist 5 types of the contract governing
contractual relations which were:-
1. Ivsivrandum: – is derived from Iouisiurandum, which indicate that Jupiter was the
god which people generally swore. As per this contract, the promisor has to call upon the gods to
declare verbally that he will bind by the rules of the contract and if he violates it, he shall be
punished. The sanctions imposed on the promisor include withdrawal of divine protection, which
means any person can kill him.
2.Sponsio: – this form of contract was similar to that of the previous one, but was
different in regard to stages in which the contract was developed:-

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At the first stage, the wine was sacrificed to indicate the compact of alliance or peace made under
the oath of gods
In this stage, the sacrifice is used as an appeal to the gods in compact not made under oath.
Lastly, it’s the verbal agreement implying the accomplishment of wine sacrifice, but at the making
of the contract, no such action is undertaken.
The punishments for breach of performance are decided by the priests and are abided by the parties
of the contract.
Nexum: – this is mainly related to loans and sales. In loan agreement, the borrower has to
declare himself indebted to the other party for the sum he is taking as a loan. In the sales agreement,
the sale can take place only in the presence of 5 people and the amount to be paid is decided by the
official weigher. In case there is a breach of contract, the creditor has the option to invoke any of
the violent measures as inscribed in the law. It’s a debt bondage contract which was abolished by
the Lex Poetelia Papiria in 326 BC.
Dotisdictio: – this was related to dowry agreement between bride and groom. In this
contract, the father of the bride, or the bride herself set forth the amount and nature of dowry to be
governed to the groom and it’s declared in presence of the groom. Since this was a social
agreement, there wasn’t any punishment in case of breach of contract. The only remedy that the
groom family has in case of breach is to compel the bride’s family in fulfilling the contract.
Apart from the above-mentioned forms, there are also other types of contracts that were prevalent
in the Roman period, which were,
Lex Mancipi:- this contract was equivalent to the modern day’s contract of transfer of property.
Fiducia :- it was an ancillary contract to the above form of contract
Uadimonium : – this contract was similar to today’s contract of guarantee.
Though the taxonomy & characteristics of all the forms of contract may be different, it still
was governed by the basic principle of contract law which was:-
Intentions of the parties have to be communicated to both the parties unequivocally.
The roman law followed the unilateral principle of contract law, as per which promisor was
bound by the contract but wasn’t entitled to anything from the other parties.
The consent of the parties was based on divine approval.

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B. Mohammedian period
In India, during the British regime, the two prevalent religion having separate personal laws
were Hindus and Muslims and each had a separate idea as to what constitutes a contractual
agreement and when shall breach takes place and what were the sanctions.
Mohammedians followed Islamic laws which are considered as the divine origin and are
believed as the revelations of the God/Allah. According to Islamic law, every aspect of their civil
law revolves around the contract, like their contract for marriage, or their contract for the
inheritance of property. The source of Islamic contract law is Surah Al-Maidah, Ayah.
The word “contract” in Arabic is Aqd which means conjunction. It denotes the conjunction
of the proposal (ijab) and acceptance (Qabul). The basic principle which the law-governed was that
there should be a presence of two parties, one should make the offer and other should accept it and
both must agree to the same thing in the same sense and the object of the contract should be to
produce a legally valid result.
Transaction related to any matter was treated as secular contracts and provisions for
there to settle the disputes to every type of contract even property and succession. The unlawful
transactions were considered void from the beginning under Muslim laws. These types of
transactions were divided into two categories under Muslim laws:-
1.Riba Al-Fadl:– in this case, it’s a contract which produced unlawful excess in exchange
of counter values in a contemporaneous transaction.
2.Riba Al-Nasi’a:- which means a contract which produced unlawful gain without
completing the exchange of counter values.
3.Riba Al-jahilya:- it’s also called pre-historic riba, where the lender asks the borrower
whether he will settle the debt or increase the debt,
Another type of transaction that was prohibited under Muslim Laws and the same
stance was taken under the Indian Contract Act were the contract related to gambling, contingent
contract or wagering contracts.
These types of contracts were called qarar and were strictly prohibited in the Quran in the
verse Sura 2 Al- Baqarah Ayah 219 and Sura 5 Al- Maida Ayah 93 & 94. These types of contracts
were also applied to speculative and aleatory contracts.
The basic principle which is followed and which is also retained in the Indian Contract Act
is that of a contract is entered into where the consideration is dependent on the future performance
of a certain event or if the consideration is not determined then it’s not allowed as per law.

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The formation of a contract according to Islamic law doesn’t require any kind of
formality; the only requirement is that the express consent of both parties. The proposal and
acceptance must be made of the same thing in the same sense (majlis).
Furthermore, the Islamic law classifies as per their special features and following are
the type of contracts
Alienation of Property:-
1.for an exchange like sale or
2.without exchange like giving a simple gift, or
3.to create succession namely bequest.
Alienation of usufruct:-
In exchange for property, namely ijara, where the movable and immovable things are
given for hire, contracts for giving service like a carriage for goods, safe custody of property.
Not being in exchange of property like an accommodate loan (a’riat) and deposit (wadiyut)
Alienation of marital services
Contracts for securing discharge of obligations like a pledge, surety ship.
Islamic laws provide two modes for invalidation of contracts, first is the right of
either party to rescind the contract unilaterally without any legal cause and the second one is to
terminate the contract on the ground of frustration. The grounds of dissolution of contracts are as
follows :-
Invalidation by mutual agreement
Cancellation of the contract by the death of either party or destruction of subject matter or
expiry of the time- period
Cancellation by termination by either party
Dissolution by the termination of the contract

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C. Hindu law
The Jurisprudential aspect of the Hindu law is fundamentally different from that of
English law’s juri’s prudence. Hindu law is the result of the compilation of numerous customs
and works of Smritikaras, who interpreted and analyzed Vedas to develop the various aspect of
Hindu law. The Hindu law dealt with contract law through titles.
Manusmriti in regarding the contract law dealt with the incompetence to enter to
contract. It laid down the principle which is also followed in the Indian Contract Act, states that a
contract entered by a minor, or intoxicated person or an old man or the cripple is not a valid
contract.
The famous India philosopher Kautilya added to the list of disqualified persons who are not
allowed to enter into the contract and included a contract between husband and wife or between
parents and son or between brothers or brother and sister or between slave and hired labour.
Manu also dealt with the fraudulent aspect of the contract and it stated that any contract
dealing with mortgage, sale, fraudulent gift or any contract which is motivated with fraudulent
aspect shall be declared null and void. Also, he held that any consent given for any transaction
under the pressure of threat or coercion shall also be declared void.
Regarding the contract by a minor, under Narada Smriti an infant is considered is someone
who is between in the stage of an embryo to upto 8 years. After that, from 8 years to 16 years the
child is considered as boyhood and after 16 years the person is competent to enter into a contract.
So it can be concluded that the age of majority to enter into a contract is 16 years, 2 years less than
what has been prescribed under the Indian Contract Act.
The ancient priest Katyanana propounded a principle which still holds good is that when a
contract has been entered and earnest money has been taken in that respect and when that person is
not able to perform that contract then the King should make the other party pay double the earnest
money as a form of punishment. The purpose of it is that the person should suffer the loss for not
fulfilling the contract.
This leads to the fundamental aspect of the contract which is the same for both the Muslim
law and Hindu law and the same principle is there in contract act is that when any agreement is
entered into which is contrary to the law then it shall have no legal force.[13]

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D. British regime
British came to India around 1600 and they started governing India through the medium of
charters and different regulations. By the Regulating Act of 1773, the Supreme Court of Judicature
was founded in Calcutta replacing the Mayor’s court and it served as the highest court of British
India from 1774 to 1862 till the time High Court of Calcutta was established under Indian High
Courts Act.
Now, before the advent of the Indian Contract Act, the
It had jurisdiction over
every person residing in English Law was applied in the Presidency Towns of Madras,
Bengal, Bihar, and Orissa Bombay, and Calcutta under the Charter of 1726 issued by King
and had the power to
George I to the East India Company.
exercise jurisdiction over
civil, criminal, admiralty Now with the indiscriminate application of English law in
cases. governing the contracts formed as per their personal laws that it
formed quite inconvenience to govern the jurial relationships. So
to remove the legal barrier the Settlement Act of 1781 as passed by the Britishers provided that
matters concerning the inheritance, succession, and contracts between the parties in the case of
Hindu and Muslims where to be followed their respective personal laws.
But in the case where one of the parties is from either of the religion like if one party is
Hindu and other is Muslim then, in that case, the law of the defendant is to be used. This was
followed in the presidency towns, but in cities outside the presidency towns, the matter was
governed by justice, equity and good conscience. This procedure was followed until the time the
Indian Contract Act was implemented in India.
In the years 1862, the introduction of the High Court took place in the town of Bombay,
Calcutta, and Madras and the charter of these High Courts also contained the same provision as
pervious law that High Courts to apply the personal laws of the respective religions before
rendering any judgments in respect to the contract cases.
But this was all subject to the legislative powers of the ‘Governor-General in Council’ as
described in clause 44 of the charter of 1865. But still, high courts were still bound to exercise their
jurisdiction in applying the personal laws of the Hindus and Muslims as prescribed clause 19 of the
charter of 1865 in the expression ‘law and equity’.

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II. The advent of the Indian Contract Act

The Indian Contract Act as applied today’s was drafted originally by the third Indian Law
Commission in the year 1861 in England. The Indian Contract Bill tried to defined laws relating to
Contracts, Sale of movable properties, Indemnity, Guarantee, Agency, Partnership, and Bailment.

The scope of the bill was to bring in the Indian Contract Act in consonance with the
English law on the same subject as established by the recognized practice, statute and
judicial decisions.
The bill was not the complete law of contract, but the aim of the bill was to suffice the need
of the country for a considerable period of time and during that period, judges of the courts were
taking the help of English laws in determining the case when they failed to arrive at the judgements
by considering the justice, equip and good conscience.
And it was decided that even if some deficiency is found in the bill, it could be added as
new chapters, so the bill was drafted to concise the law of contracts to suit the needs of the people.
The drafters of the bill knew that different religious people followed personal laws and for them, it
will be difficult to abide by the new rules, so provisions were made so that the special customs of
the personal laws governing any aspect of the contractual relationships would not be affected by the
new law, unless and until they are not in contrary to the new rules.
Though the drafters tried their best to imbibe the regular practices which were followed in
India in the bill, they failed to do so. One particular instance is that in case of a dispute regarding
the peculiarities of the contract, the Indian Courts refused to take into account the English law in
deciding the case, but took the help of broader and safer law in determining the case where the
usual principle is that whatever man promises he must perform.
But this aspect was not included in the draft bill. This would be mean that a man whoever
the compelling situation maybe for not abiding by his promise, once he made a promise he has to
perform it the last day of your life.
Though it may seem that a rigid principle like this would make sense, some exceptions have
to be provided or else it would be a gross injustice to the community. Even with the vice-like this,
the contract law came into effect.
The act came into effect in 1872 but soon afterwards amendments were made in that regard,
which repealed section 76 to 123 dealing with the sales of goods act and separate legislations were
enacted called ‘Sales of Goods Act 1930’ to govern that area. Also, section 239 to 266 dealing with
partnership was repealed and new legislation was enacted called ‘Indian Partnership Act 1932’.

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Conclusion
By analysing the development of the contract through different time periods ranging from
Roman law to Muslim Law to Hindu law and then to legal sanctions in British Regime, it can be
concluded that though the technicality and the modes and means of punishment may vary, even the
applicability of the law may vary, but the underlying principle of all the laws remained the same,
that minor cannot contract, consent should be given by both the parties for the same manner and
same sense and that certain person is disqualified from contracting like intoxicated, old person
cannot contract.
It can be further concluded that British tried to codify the law to bring in uniformity but they also
tried to incorporate the personal laws of the different religious groups unless they are in contrary to
the main law, as they realized that underlying principle for personal law is similar to that of the
contract act.
So it can be said that through different time period the contract law has been amended and
interpreted in different ways in different communities, but general principles unchanged and no
attempt has been made to change it.

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II. Introduction – Essentials of a Valid Contract

To form a valid contract, every contract must fulfil the ‘Essentials of a Valid Contract’. Section-10
of the Indian Contract Act,1872 specifies some conditions which need to be satisfied in the mandate
to create a valid contract.
A contract is defined under Section-2(h) of The Contract Act, 1872 means “any agreement which is
enforceable by law[i]”. The word agreement is also defined under Section-2(e) of The Contract Act,
1872 means “Every promise and every set of promise forming consideration for each other is an
agreement[ii]”
II. Elements of a Valid Contract
i. Offer and Acceptance
To get started for a contract, there must be an offer from either side of the party, without the offer a
contract cannot be formed. There must be an offer from one party and acceptance from the other
party. The offer and acceptance must be ‘lawful’ mean it must meet the requirement if the Contract.
The word offer is defined under Section- 2(a) of the Indian Contract Act, 1872 whereas Section-
2(b) defines that when an offer is accepted it becomes a promise. Indian Contract act defines an
offeror as “Promisor” and the person who is accepting the offer as “Promisee”
When the offer is accepted, and such acceptance has been conveyed, to the offeror, the parties are
restricted by their appropriate promises. Much the same as an offer, even an acknowledgement can
be renounced before the correspondence of acknowledgement comes to the offeror.
The most significant part of acknowledgement is that performance of an offer, in disregard of the
said offer isn’t acceptance. In this way a demonstration is done, adding up to acceptance, yet
acceptor being unmindful of the offer, it’s anything but a substantial acceptance.
Acceptance can either be expressed or implied but it should be in a reasonable manner if acceptance
is done by any third party or stranger who is not the party to the contract, such acceptance is not
valid.
n the case of Lalman Shukla v. GauriDutt[v]it was held that Mere understanding of the contract
does not establish acceptance, it must be communicated as well.
Case Law
Lalman Shukla V. GauriDutt is touted as a landmark judgment for the validity of the contract under
the Indian Contract Act, 1872. The case was filed in the Allahabad high court in the year 1913 and
was presided over by Justice Banerji at the Allahabad High Court.
Facts Of The Case:

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In this case, the defendant GauriDutt’s Nephew had absconded and was nowhere to be found.
After the defendant became aware of the same, Dutt had sent all the servants in search of the
missing nephew. The plaintiff Lalman Shukla was one of the servants who had gone out in
search of the nephew. The plaintiff eventually found him and brought him back.
When Lalman Shukla had left the house to leave for Haridwar from Kanpur he was handed some
money for his railway fare and other expenses. As soon as Lalman Shukla had left the house, the
defendant announced a reward of Rs. 501 for whosoever found Dutt’s nephew. Shukla had no idea
that such an announcement was made. The plaintiff found the missing nephew and brought him
back to his home in Kanpur. Six months after the said incident occurred, Dutt sacked the plaintiff.
After being removed from the job, the plaintiff claimed the money from the defendant and the latter
denied to pay the said remuneration. As a result the plaintiff Lalman Shukla filed a case against
GauriDutt, his master, for not rewarding him as he was entitled to.
Issues Raised In This Case:
The main issues which were raised in this case were as follows:
 Whether Lalman Shukla was entitled to get the reward from GauriDutt for tracing the
missing boy.
 Whether there was a valid acceptance of the offer made by the plaintiff.
 Whether there exists a contract or whether the situation amounts to a contract between the
two.
Arguments On Behalf Of The Plaintiff (Lalman Shukla)
The plaintiff Lalman Shukla strongly affirmed that the very performance of him finding the
missing boy was sufficient enough for him to be entitled to the reward. Since according to
GauriDutt’s condition whoever found the lost boy and brought him back would get the reward.
Therefore, as per the condition of the defendant, the plaintiff had traced the boy and brought him
back.
He stated that it is not important to have prior knowledge about the reward, especially under
this circumstance. He also emphasized the fact that section 8 of the ICA 1872, states that ‘the
performance of the act or the acceptance of any consideration of a proposal is an acceptance of the
proposal’.
And in this present case, the condition as stated by the defendant GauriDutt was to find the missing
child to be rewarded Rs 501.
He stated that it was immaterial that the person who has performed the act must have
the knowledge of the condition to claim the reward.
Arguments On Behalf Of The Respondent

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The defendant asserted and strongly argued that the plaintiff Lalman Shukla was not aware
of the offer and had no knowledge about it before finding the defendant’s nephew.
So an offer without the knowledge of the offeree or the promise cannot be accepted and also there
was no such possibility for the plaintiff to accept the offer without even knowing about it.
GauriDutt argued that according to section 2(a) of the Indian Contract Act, 1872,
“When one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to
make a proposal”.
Further under section 2(b),
“When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted. A proposal, when accepted, becomes a promise”
Therefore, the defendant contended that assent was essential to create a contract between both
parties. This means that before accepting the offer the offeree must have complete knowledge about
the facts to give assent or approval. But in this particular case, the plaintiff was completely unaware
of the reward which was associated with it and the plaintiff was merely doing his duty.
Therefore, according to section 2(h) of the ICA, since there was no acceptance there was no
agreement that can be enforceable by law.
So according to the defendant GauriDutt, Lalman Shukla was not entitled to get the reward
and hence he couldn’t claim it.
Ratio Decidendi:-
In the present case of Lalman Shukla vs GauriDutt, it is derived that in order to enter into a
contract, two critical aspects should be considered,
1. To have complete knowledge of the facts of the offer or proposal
2. Acceptance of the offer
A person to whom the offer is made, the offeree, must accept the proposal. The communication
regarding the offer is also very important as mentioned in section (4) of the ICA. It states that
communication can only be complete when it comes to the knowledge of the person to whom it is
made.
To convert a proposal into an agreement both knowledge and assent must be present. Here, in the
given instance, both were missing.
As the plaintiff had no knowledge and hadn’t given his approval or accepted the proposal there did
not exist a valid contract between the two.
At the time when the plaintiff was searching for the boy, his obligations and duties were as a
servant. Therefore the plaintiff Lalman Shukla was not entitled to get the award.

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The Judgement
In the said case, the petitioners’ appeal against the respondent GauriDutt was dismissed by the
court.
After analyzing all the facts of the case, the honourable high court held that for creating or entering
into a valid contract there has to be knowledge and assent to the offeree made by the proposer.
Here, the plaintiff did not know the reward before performing his act. He only came to know about
it later, in which case there was no possibility of accepting the offer.
Hence, there was no contract. Therefore, Lalman Shukla was not entitled to get or claim the
reward. The judge reiterated that the plaintiff was fulfilling his obligations as a servant of tracing
the missing boy which was a part of his duty. Therefore, the plaintiff’s suit against the defendant
was completely dismissed by the court.
Related Cases
The petitioner in presenting his case had relied upon Gibbons v. proctor (1891) in the English
Contract Law. In this case, the court had held that if any person performs certain conditions of the
contract, even if he is not aware of the reward or he does not have the knowledge of the reward, he
is entitled to get the reward.
The respondent on the other hand relied on the famous U.S. case Fitch v Snedaker (1868).
In this case, Fitch after giving the information about the murderer’s identity found out about
the reward and then claimed it. The court in the said case had held,
“The form of action in all such cases is an assumption. The defendant is proceeded against as upon
his contract to pay, and the first question is, was there a contract between the parties? To the
existence of a contract, there must be mutual assent, or, in another form, offer and consent to the
offer. . .without that there is no contract. How, then, can there be consent or assent to that of which
the party has never heard?. . The offer could only operate upon plaintiffs after they heard of it”
Therefore, Fitch was not entitled to the reward as he accepted the offer in ignorance. And the
person accepting the offer, the offeree, must have all the information regarding the reward before
claiming for rewards associated with that action.
In The End…
The case between the plaintiff Lalman Shukla and the defendant GauriDutt examined the validity of
the contract in the absence of prior acceptance. According to the judgement given by the Allahabad
high court, a contract without acceptance is void.
Therefore, despite his services, the plaintiff Lalman Shukla was not entitled to get the reward as the
mere performance of the act does not mean an assertion to the contract. Additionally, to turn an
agreement into a proposal, it has to be enforceable by law. And lastly, the communication of the

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proposals means that the person to whom the offer or the proposal is made must come to the
knowledge of the acceptor before accepting the proposal.
Case Citations
 Lalman Shukla vs. GauriDutt [1913] 40 ALJ 489
 Fitch vs. Snedaker [1868] 38 N.Y. 248
 Gibbons v Proctor [1891] 64 LT 594

Illustration
‘A’ offers ‘B’ 100 pens for Rs. 5 each. To become a Contract, the offer must be accepted by B. If B
accepts the offer, it becomes the valid Contract.

The Intention of creating a Legal Relationship: The parties which are forming an agreement must
have an intention to create a Contract. There must involvement of Legal Obligations and both
parties must be aware of the Legal Consequences. In those contracts where is, no Legal Obligations
involved such contracts are not enforceable of Law, e.g.: – social or domestic agreement with
family, relatives, or friends.
ii. Lawful Consideration
Consideration in a layman language means something in return for something. To make a valid
Contract enforceable by law it should have Lawful Consideration. Consideration means benefit
granted for the fulfilment of a promise. It need not significantly be money; however, it should be
something which has been acknowledged by the parties and has some significance.
According to Section 25– of the Indian Contract Act– A contract without consideration is void.
However, there certain considerations that are unlawful and are specified under Section 23- of the
Indian Contract Act.
Consideration could be of three types: –
1.Past Consideration- when the promisor has accepted consideration before the date of the
performance of the contract by any party. E.g. Advance payment before receiving the parcel.
2.Present Consideration- when consideration is given on the spot while the contract is made or
executed. Thus, it is also called “executed consideration.
3.Future Consideration- when consideration is given after the contract is made. For example- cash
on delivery of an object.

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In the case of Currie v. Misa[vi], the definition of Consideration is defined as “A valuable

Consideration in the perception of law may comprise either in certain Rights, Interest, Profit or
Benefit accumulating to one gathering or some avoidance disservice, misfortune or duty given,
suffered or attempted by the other”.
Illustration:
A and B came into a Contract where A will supply 100 pens to B where B will give Rs. 5 each for a
pen. Here, Rs 5 each for a pen is the consideration for the supply of pens. It’s a lawful
Consideration.
iii. Parties must be sufficient to contract (Capacity):
Parties must be capable enough to enter into a Contract i.e., competent to contract. Every party is
competent to contract if he fulfils the requirement given under Section 14- of the Indian Contract,
1872.
These determinants are:
A person should attain the age of majority i.e., 18 years. If the contract is done with the minor then
the contract will become void i.e., Void ab Initio it was held in the Mohri Bibi v.
DharmodasGhose
Case Law
In MohoriBibee V/S DharmodasGhose, at the end it can be concluded that any agreement or deed
in which minor is party to it or is included in such contact by any way, such deed or agreement
shall be declared null and void because such agreement is no agreement in the eyes of law. Any
agreement with an infant cannot be administered against them. In cases minors parents or
custodians shall not be liable for the dealings done by the minor without their consent or
knowledge, and hence they will not be liable to return the amount back taken by the minor out of
the moral obligations. But parents and guardians will be liable to repay back the amount when
minor or an infant acted with the consent of the his/her parents or his/ her custodians. If any minor
has got any profit out of the void contact the he/she cannot be forced to reimburse it back or make
compensation for it.
The party should be of sound mind (sane mind).
He/ she is not disqualified from contracting by any Law to which he is subject, want of capacity
may thus arise from minority, lunacy, idiocy, drunkenness etc. If any of the party to a Contract
suffers from such disability, the agreement is not enforceable excepting perhaps in some special
cases.
All these requirements must be met concurrently.

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If the contract is made for the benefit of the minor, it’s a valid contract. then the doctrine of
promissory estoppel will not be applied.
The doctrine of Promissory Estoppel
Promissory estoppel is a doctrine that prevents an individual from backpedalling on a promise
regardless of whether a lawful agreement doesn’t exist. It expresses that an aggrieved party can
recover damages from a promisor if the damages caused were the consequence of a promise made
by the promisor, which the receiver of the promise depended on to his resulting inconvenience.
Illustrations:
1.X came into a contract with B for selling 100 pens for Rs. 5 each. Here, B is a minor i.e., 16 years
old. Hence, it’s not a valid contract.
2.X came into a contract with B for selling 100 pens for Rs. 5 each. Here, X is of unsound mind i.e.,
He is a lunatic. Hence, it’s not a valid contract.
3.X came into contract B who is 21 years old and is of sound mind for selling 100 pens for Rs. 5
each. Here, X is of unsound mind i.e., He is a lunatic. Hence, it’s not a valid contract.
X came into contract B who is 21 years old and is of sound mind for selling 100 pens for Rs. 5
each. Hence, it’s a valid contract.
IV. Free consent by the parties
This means parties that are entering into a contract should do it with their will without the external
factors or forces. Section-14 of the Indian Contract Act, 1872 defines contract entered with free
consent is a valid contract and if affected by some other factors then, would believe a contract
invalid.
These factors are defined by the Indian Contract, 1872: –
1.Coercion: It is defined under Section 15- of the Indian Contract Act, 1872 which means
Committing any act which is forbidden by law defined under the Indian Penal Code or unlawful to
confine of property, or frightening to commit such acts. The act should be harmful to the other
party and some legal action may arise out of it. e.g.: – A husband forces her wife that if she will not
sign the property papers, he will throw acid on her. This is amounting to coercion and contract
signed by under the coercion amounts to an invalid contract.
2.Undue influence: It is defined under Section 16-of the Indian Contract Act, 1872 which
means one party uses its dominant position over the party and tries to obtain advantage out of it by
influencing. Such examples are the relationship of employer-employee, principle-Furthermore, it
says that the person who is in the position to dominate the will of the other party present has to
prove that the contract entered by the parties was not by the undue influence. Hence, it defines upon

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whom the burden of proof will fall. e.g.: – A doctor is in the dominant position with the relation to
the patient, here, the doctor influences the patient to sign papers for the operation.
3.Fraud: It is defined under Section 17 of the Indian Contract Act, 1872 which means when
the terms which are presented by one party in front of the other party is to cause damage, with the
ill- will and to gain advantage out of it. Presenting the false statement, hiding any fact, fake
promises made without the intention to perform such act, act done to deceive the other party- such
acts will constitute fraud if done with the intention to doing it so. E.g.: – A is selling his refrigerator
to B presenting the fake facts that its freezer is working well and have sufficient gas but which was
all wrong. Hence, here it’s an invalid contract because A is gaining an advantage by the method of
fraud.
4.Misrepresentation: It is defined under Section 18 of the Indian Contract Act, 1872 which
means presenting the False representation of facts without the wrong intentions or to deceive the
other party. In misrepresentation, the party is innocent and has done the act without knowing it.
E.g.: – A asked B if he had faced any issues with water pipeline system in the basement, and he
said that he has never faced any issues regarding the same, absolutely not. A bought the house after
considering the fact, and within the moving in of A, the basement was flooded with water due to
rainy season and A suffered a lot of damages.
5.Mistake: Mistake of Fact or Mistake of Law is defined underSection 20 and 21 of the
Indian Contract Act, 1872 If any mistake (fact or law) done by either or both parties will lead to an
invalid contract. E.g.: – when X wants to enter into a contract with A for selling the car but
mistakenly enters into a contract with D believing him to be A and sells him the car. Hence, it’s
become an invalid contract.
v. Lawful object
The object must be lawful in other words we can say that it should not be illegal, immoral, or
against the policy of the law. Every agreement which contains unlawful object results into the
formation of the void contract.
vi. The certainty of terms
The terms and conditions of the contract must be certain and should not be vague or illusory. There
can never be a contract to contract in the future.
vii. Possibility of performance
The agreement must have the capability to be performed. An agreement to do an act impossible in
itself is void, i.e., if A promises to give Rs. 1000 to B, if B can prove that two parallel lines can
meet each other such an agreement is void.

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viii. Void Agreements

The agreement must not contain certain elements that result in making the contract void. Certain
agreements are declared void under the Indian Contract Act, 1872 which are given below: –
Agreement in restraint to marriage (Section 26).
Agreement in restraint of trade (Section 27).
Agreement in restraint of legal proceedings (Section 28).
Agreement having uncertain meaning (Section 29).
Wagering Agreement (Section 30).

III. Conclusion
These are the most essential and basic elements (standard) for the formation of Contracts, which are
to be satisfied to make a contract a valid contract.

The most basic and essential element of a valid contract is that there should be an offer and
acceptance of the same. The intention to create a legal obligation is necessary for the existence of a
valid contract. Communication of offer and acceptance is absolutely required.
Section 2(h) of the Indian Contract Act, 1872 defines the term “contract” as an agreement
enforceable by law. A proposal/offer and its acceptance is the universally acknowledged process for
making a contract of which the former is thethe former is the beginning point.
Section 2(a) defines a proposal as “when one person signifies to another his willingness to
do or abstain from doing anything, with a view of obtaining the assent of that other to such act or
abstinence, he is said to make a proposal.”
The person who makes the proposal is called the promisor and the person accepting is called the
promisee (Section 2(c)). As per the definition, a valid proposal has two main parts. Firstly, an
expression of the offeror’s willingness to do or abstain from doing something and secondly it is
made with a view to obtaining the assent of the offeree to the proposed act or abstinence.
While making a contract, it is essential that the offer should be communicated to the other party. A
proposal is complete when it is communicated. (Section 3)
A valid offer may be made either expressly or impliedly. An offer that is made by conduct is called
an “implied offer” whereas the one which is made by words written or spoken, is called an “express
offer” (Section 9). The conduct of the part includes not only their acts but also their omissions.

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Communication of proposal
Section 4 provides that the communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made. When such an offer is accepted with knowledge of the
reward, the fact that an informer was influenced by some other motives other than the reward will
be immSection 4 provides that the communication of a proposal is complete when it comes to the
knowledge of the person to whom it is made. When such an offer is accepted with knowledge of the
reward, the fact that an informer was influenced by some other motives other than the reward will
be immaterial. However, an act in ignorance of an offer does not amount to acceptance of that offer.
Intention to contract
In order to create a valid contract, every offer must be made with the intention to create a
legal obligation. Under English law, the position was well settled in the case of Balfour v. Balfour
[(1919) 2 KB 571 (CA)] where it was held that “to create a contract there must be a common
intention of the parties to enter into legal obligations”.
It is for the court in each court to decide whether the parties must have intended to enter into
legal obligations. The test of contractual intention is objective, not subjective. What matters is not
what the parties had in mind, but what a reasonable person would think, in the circumstances, their
intention to be.
It is not specified anywhere under the Indian Contract Act, 1872 that parties should have the
intention of creating a legal obligation. But it is as essential as it is under English law. It can be
interpreted from the term “willingness” which shows the intention to be bound by the proposal
when accepted.
The term of the offer must be certain and not vague. Agreements, the meaning of which are
not certain, or capable of being made certain, are void (section 29). ‘A’ agrees to sell ‘B’ “100 tons
of oil”. There is nothing whatsoever to show what kind of oil was intended. The agreement is void
for uncertainty. But if A agrees to sell B all the grain in his granary at Ramnagar, then the
agreement is valid.
It must be distinguished from an invitation to offer
An offer has to be distinguished from an invitation to receive offers. The latter is an offer to
negotiate or may be considered an offer to receive offers whereas an offer is the final expression of
willingness by the offeror to be bound by his offer.
If a party, without expressing his final willingness, proposes certain terms on which he is
willing to negotiate, he is only making an invitation to the other party to make an offer on those
terms. The distinction was clearly laid down in the infamous case, Harvey v. Facey [1893 AC 552]

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For example, ‘A’ suit was displayed with a price tag in a shop. This is not an offer but it is
an invitation to offer.
It may be general or specific in nature
The offer can be given to the public at large in general by advertisement in newspaper etc. or it can
be given specific person too.
Offer must be made with a view to obtain the assent
The offeror must obtain consent which should be “free” in nature as defined under Section
14 as it defines it should not be taken under coercion [section 15], undue influence [Section 16],
fraud [Section 17], misrepresentation [Section 18] & Mistake [Section 20, 21 and 22].
Definite, unambiguous and certain in nature
Offer must be certain as specified in [Section 29], it must be unambiguous means that the
thing offered must clearly specified.
For example, X offered to sell his car to Y. X is owned two cars one is of Ford & the other
is of BMW and X offered his Ford car to Y but Y thought X is offering him his BMW one. As in
the offer it was not definite which car X wants to sell, thus this is not a valid offer.

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