CERTIFICATE COURSE ON VALIDITY OF CONTRACTS IN

INDIA
Objectives of the Course
Contract Law has always held a higher significance as compared to various other laws. Almost
every other nation has witnessed disputes on the validity and invalidity of Contracts due to the
complexities involved in this matter, and the same goes for India. Thus, it is highly significant to
understand whether a Contract is valid or invalid. The present Course shall deal about the
validity of a Contract law at the basic level, as provided under the Indian Contract Act. You shall
learn about the provisions dealing with validity. These include Consideration, Consent and
exclusively void contracts like Wagering Contracts. You shall be easily able to make a
distinction between a valid and an invalid contract.

Course Completion

You shall receive a Certificate upon successful completion of the Course. It is pertinent to note
that Certificates shall only be sent when you successfully complete the Course – i.e. Study all
Modules and Submit the completed Assignments. The Submissions shall be made on or before
the last date. No submission shall be considered after that. We shall send the Certificates by
14th July to everyone i.e. within 14 days of the Course Completion.

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The TOP PERFORMERS will get an opportunity either to publish their task content on our
Website or Letter of Recommendation or Merit Certificate or Free Publication in our Journal or
Internship Opportunity to work with us at a very vital position or Opportunity to design the
Courses for hundreds of candidates.

Course Outline and Schedule

The Course has been designed in such a way that even a layman is able to comprehend the
contents of the Course. The table mentioned below contains the Content of the Course divided
into 4 Modules alongwith the dates they shall reach you, to provide a comprehensive
understanding :-

Module Module Date

no.
1. Introduction to General Contracts 1st June
2. Agreements that make a Valid 6th June
Contract and Importance of Free
Consent
3. Consideration and Exclusively 12th June
Void Contracts
4. Exclusively Void Contracts Contd. 16th June

5. Assignment 18th June

6. Assignment Submission Last Date 30th June

We would now take this opportunity to begin the Course with Module 1 of the Course. All the
very best from our side. Take the Course seriously and study very well. Do the assignments on
time. Let us begin.

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MODULE 1: INTRODUCTION TO
GENERAL CONTRACTS

1. What is a Contract?
 According to the Merriam Webster’s dictionary, “a Contract is a binding agreement
between two or more persons or parties; especially: one legally enforceable.”

For Example: A contract can be business agreement for the supply of goods or
services at a fixed price or, a contract can be the act of marriage.

 William Markby, in his book entitled, ‘Elements of Law’ quoted Savigny’s

definition of contract. According to Savigny, “a Contract is the concurrence of
several persons in a declaration of intention whereby their legal relations are
determined.”

 Section 2(h) of the Indian Contract Act, 1872 gives broader definition. It
defines, “an agreement enforceable by law is a contract.”An agreement
comprises of complementary promises between the two gatherings

A contract or an obligation to perform a promise may arise in the following ways;

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 Notice

By Agreement/
Lapse of Time
Contract

Obligations to Standard Form of Inability to Death/ Madness

Perform Contract perform of one Party

Promissory
Estoppel

1.1. Some Important Decisions Pertaining to Obligations

 In the case of Meritt v. Meritt1, it was held that, it was clear that the parties intended
to create legal relationship and, therefore, the husband was bound by the contract.

 On account of UOI v. Gopal Chandra2,it was held that, a "prospective" renunciation

is an offer to stop a post and the same can be pulled back before the offer is
acknowledged by a skillful expert.

 The Punjab and Haryana high court in PC Wadhwa v. St. Of Punjab3 held that, the
guideline of promissory estoppel did not make a difference.

2. Meaning of Valid and Invalid Contracts

1
(1970) 2 All E.R. 760
2
AIR 1978 SC 694
3
AIR 1987 P and H 117

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 To be enforceable by law, an agreement must have the fundamental components of a
legitimate contract as contained in Section 10.

Section 10 of the Act, 1872 says “All agreements are contracts if they are made by the free
consent of parties competent to contract, for a lawful consideration and with a lawful
object, and are not hereby expressly declared to be void.”

The fundamentals required for a valid contract, in this manner, are as under;

1. ‘An agreement’ between the two parties. As we know, Section 2(e) of the Act, 1872
defines agreement.

2. Agreement ought to be between the ‘parties who are competent to contract’. Section 11
says the parties must be of the age of majority and of sound mind and must not be
disqualified from contracting by any law to which they are subject.

3. ‘There should be a lawful consideration and lawful object’. As the Section 23 of the Act
says, the consideration or object is lawful when it is not illegal, or fraudulent, or involves
injury to the person or property, or immoral, or opposed to public policy.

4. There ought to be ‘free consent’. As Section 14 says, Consent is said to be free when it is
not caused by coercion, or undue influence, or fraud, or misrepresentation, or mistake.

5. The understanding must not be one, which has been explicitly pronounced to be void.
Sections 24-30 give certain types of agreements which have been expressly declared to be
void.

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 2.1. Comparison between Void and Voidable Contracts:

An invalid Contract may be of two sub-types, one being void and the other voidable.

Invalid
Contracts

1. Void
Contracts

2. Voidable
Contracts

It hence becomes important to note the comparison between the two.

 A contract which is void is not valid. Section 2 (g) of the act, 1872 says that, ‘an
agreement not enforceable by law is said to be void’.
 Section 2 (i) of the act says that, it is one which could be avoided by one of the
parties to the contract at his option.
 Thus, a void agreement is a nullity from its commencement and no rights collect to
any gathering thereto,

while

 A voidable contract is an agreement which can be maintained a strategic distance

from by one of the celebrated thereto. Such an agreement stays valid until the point
when it has been kept away from.

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 3. CONSEQUENCES OF VALID AND INVALID CONTRACT

A contract may be said to be invalid or illegal in following three cases:

 Firstly, is the contract is illegal in its inception, neither party can assert that he did not
intend to break the law. Both parties have expressly and clearly agreed to do
something that in fact is prohibited at common law.
 Secondly, if the contract is ex facie lawful, but both parties intend to exploit it for an
illegal purpose, it is illegal in its inception despite it innocuous appearance. Both
parties intend to accomplish an unlawful end and both are remediless.
 Thirdly, if the contract is lawful in its formation, but one party alone intends to
exploit it for an illegal purpose, the law not unnaturally takes the view that the
innocent party need not be adversely affected by the guilty intention of the other.

The consequence where the contract is illegal in its inception-

 A contract that is illegal as formed and is therefore void ab initio is treated by the law as
if it had not been made at all. It is totally void, and no remedy is available to either party.
No action lies for damages, for any account of profits or for share of expenses.

 Neither party can recover what he has given to the other under an illegal contract if in
order to substantiate his claim he is driven to disclose the illegality. The maxim in pari

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 delicto potiorestconditiodefendentis applies and the defendant may keep what has been
given.

 A plaintiff however may recover money, chattels or land transferred under an illegal
contract to the defendant, if he can frame a cause of action entirely independent of the
contract, for in these circumstances he is not compelled to disclose the illegality.

 A subsequent or collateral contract, which is founded on or springs from an illegal

transaction, is illegal and void.

4. IMPORTANCE OF VALID CONTRACT

Do parties owe each other duty to negotiate in good faith? Common sense suggests and the law
has long recognised that the obligations created by a contract are not at all of equal importance. It
is for parties to set down their own value on the terms that they impose on each other. When a
party to a contract fails to fulfil agreed upon obligations, he or she can be held accountable for
the breach if there is an existing record of the contract.

Breaches could include:

 A failure to perform a contractual duty on time;

 A failure to perform in accordance with the terms of a contract;

Or

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A failure to perform at all.

Fortunately, even when someone fails to abide by an agreement, contract law offers a form of
relief to non-breaching parties in the form of damages. The most commonly awarded damages
include:

 Compensatory damages, which are intended to place the non-breaching party in the position
that he or she would be in had the breaching party fulfilled his or her end of the contract;

 Punitive damages, which go above and beyond compensatory damages and are intended to
punish the breaching party and discourage similar behaviour in the future;

 Nominal damages, which are awarded when a breach occurred, but the other party did not
actually experience any monetary loss; and

Liquidated damages, which are included in the contract when it is formed in the event that one
of the parties fails to uphold its end of the bargain.

In some rare cases, courts are also willing to order the breaching party to perform the service or
exchange as described in the contract. This is known as specific performance.

When a non-breaching party has already provided a benefit to the other party, he or she can also
receive restitution. Contracts are legally enforceable and the consequences of failing to comply
with the terms of an agreement can be severe.

This helps encourage those who enter into agreements to abide by the set terms. It also provides
those who enter into a contract with the knowledge that they can collect damages for a breached
contract.

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