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Unit 1: Law of Contract

An illegal agreement is one that the courts will not enforce because the purpose is to achieve Notes
an illegal end. Illegal contract are those contract that are forbidden by law. All illegal contracts
are void. Because of the illegality of their nature they cannot be enforced by any court of law.
Infact even associated contracts cannot be enforced. Contracts which are opposed to public
policy or immoral are illegal. Similarly contracts to commit crime like supari contracts arte illegal
contracts.

1.4 Essential of Contract

According to Section 10, “All agreements are contracts if they are made by the free consent of
the parties competent to contract, for a lawful consideration and with a lawful object, and are
not hereby expressly declared to be void”. As per the above section, a contract must have the
following elements.
Intention to create legal relationship: The parties entering into a contract must have an intention
to create a legal relationship. If there is no intention to create a legal relationship that agreement
cannot be treated as a valid contract. Generally there is no intention to create a legal relationship
in social and domestic agreements.

Example: Invitation for lunch does not create a legal relationship. Certain agreements and
obligation between father and daughter, mother and son and husband and wife does not create
a legal relationship. An agreement wherein it is clearly mentioned that “this agreement is not
intended to create formal or legal agreement and shall not be subject to legal jurisdiction in the
law of courts” cannot be treated as a contract and not valid.
Lawful 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.

Example: A rents out his house for the business of prostitution or for making bomb, the
acts performing there are unlawful. Hence such agreement cannot be treated as a valid contract.
Therefore the consideration as well as the object of the agreement should be lawful.

Agreement not expressly declared void: Sections 24 to 30 specify certain types of agreement which
have been expressly declared void.

Example: Restraint of marriage which has been expressly declared void under Section 26.
If John promises to pay $50 to Mary if she does not marry throughout her life and Mary promise
not to marry at all. But this agreement cannot be treated as a valid contract owing to the fact that,
under section 26 restraint of marriage expressly declared void. Some of the agreements which
have been expressly declared void are agreement in restraint of legal proceedings, agreement in
restraint of trade, agreement in restraint of marriage and agreement by way of wager.
Proper offer and its acceptance: To create a valid contract, there must be two or more parties.
One who makes the offer and the other who accepts the offer. One person cannot make an offer
and accept it. There must be at least two persons. Also the offer must be clear and properly
communicated to the other party. Similarly acceptance must be communicated to the other party
and the proper and unconditional acceptance must be communicated to the offerer. Proper offer
and proper acceptance should be there to treat the agreement as a contract which is enforceable
by law.
Free Consent: According to section 14, consent is said to be free when it is not caused by (i)

coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract
made by any of the above four reason, at the option of the aggrieved party it could be treated as
a void contract. If the agreement induced by mutual mistake the agreement would stand void

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