There are three main essentials of a valid contract:
The parties entering into a contract must have an intention to create a legal relationship.
An agreement must be supported by a consideration of something in return. That is, the agreement must be supported by some type of service or goods in return of money or goods.
To create a valid contract, there must be two or more parties. One who makes the offer and the other who accepts the offer.
Some other aspects that may apply:
- Capacity to contract – Parties entering into an agreement must be competent and capable of entering into a contract – must be of sound mind and of age to enter into a valid agreement which can be treated as a valid contract.
- Consent – Consent is said to be free when it is not caused by (i) coercion (intimidation, threats, physical pressure and force), (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by any of the above four reasons, at the opinion of the aggrieved party it could be treated as a void contract.
- Legality of object – The objective of the agreement must be lawful. Any act prohibited by law will not be valid and such agreements cannot be treated as a valid contract. Therefore the consideration as well as the object of the agreement should be lawful.
- Possibility of object – if the act is impossible of performance, physically or legally, the agreement cannot be enforced by law. There must be possibility of performance of the agreement.
- Necessary formality – The contract act does not insist that the agreement must be in writing, it could be oral. But, in some cases the law strictly insist that the agreement must be in writing. These agreements are valid only when they fulfil the formalities like writing, registration, signing by the both the parties are completed. If these legal formalities are not completed, it cannot be treated as a valid contract.
- Certainty of meaning – Wording of the agreement must be clear and not uncertain or vague. On the ground of uncertainty, an agreement would stand void. If the meaning of the agreement can be made certain by the circumstances, it could be treated as a valid contract.