An Agreement Becomes a Contract When: It Meets Certain Conditions -

Table of Contents

Introduction:

It is true that all contracts are agreements; however, we cannot say that all agreements are covered under the purview of contracts. An agreement becomes a contract when some specific conditions are met under the law. In this article, we explore when an agreement becomes a legally valid contract. So please stay tuned and read below.

Conditions When an Agreement becomes a Contract

Before we start discussing when an agreement becomes a contract, we should know what a contract is under the law. As we refer to the definition of a contract, which is given under section 2(h) of the Indian Contract Act, 1872, a contract is defined as an agreement enforceable by law.

Let’s understand with an example. Suppose Mr X offer to sell his house to Mr Y for ₹1 lakh; Mr Y agrees to buy that house and promises to purchase that house at that price. According to that definition and example, we can say that the two main elements are essentially required: an agreement and enforceability.

What are Agreements?

As we refer to the definition of agreement, which is defined under section 2(e) of the Indian Contract Act,1872. According to that definition, “Every promise and every set of promises, forming the consideration for each other, is an agreement”. According to the definition of agreement, we can say that a promise is covered under the purview of an agreement.

What is a Promise?

As we refer to the definition of promise, which is described under section 2(b) of the Indian Contract Act, 1872. The term promise is clearly defined as: “When one 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”.

Accordingly, an agreement is a two-sided transaction that is made between two or more persons. To fulfil the agreement, a proposal or offer is made by one party and is accepted by the other. After observing all these things, we can understand that an agreement becomes a contract when it falls under a legal obligation. If an agreement is not enforceable by law, it does not become a legally valid contract.

Enforceability of Agreements:

Enforceability plays a crucial role when an agreement becomes a contract. As we refer to section 10 of the Indian Contract Act, 1872, it deals with the enforceability of an agreement. According to that, “All agreements are contracts if they are they 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 second part of this section 10 defines that, “Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents”.

Therefore, as per the provisions of section 10 of the Indian Contract Act, 1872, certain conditions need to be met for an agreement to become a contract. These are stated below.

Competent Parties:

According to the provisions of sections 11 and 12 of the Indian Contract Act, which mainly deal with the competence of the contract. According to those sections, the following persons are not competent to contract.

Minors
Persons of unsound mind
Disqualified by law

Free Consent:

The contracting party must agree to act or not in the same sense, and that consent is not obtained by coercion.

Coercion:

Which is defined under Section 15 of the Indian Contract Act, according to which any act is prohibited by law.

Undue Influence:

Which is defined under Section 16 of the Indian Contract Act, according to which, when one contracting party misuses her position or power and forces another party to enter an unfair deal.

Fraud:

Which is defined under Section 17 of the Indian Contract Act.

Misrepresentation:

Which is defined under Section 18 of the Indian Contract Act. According to that, when one contracting party makes a false statement of fact, or makes an incomplete statement, and tries to induce another party to agree.

Mistake:

When the contracting party agrees by mistake of law or fact. Such an agreement does not become a valid contract, and is treated as void under the law.

Lawful Consideration and Lawful Object:

These are defined under Section 23 of the Indian Contract Act. According to that, for making a legally valid contract, the object and consideration must be lawful. It should not be covered under as forbidden by, or defeat any legal provision, fraudulent manner, against public policy, not harm to any person or property.

The Agreement made for Consideration:

According to section 25 of the Indian Contract Act, 1872, there is no legal value to an agreement without consideration, and it is void. However, there are certain conditions as mentioned in Section 25 of the Act; if they are met, the contract without consideration is considered valid.

The agreement must not be expressly declared to be void:

According to the provisions of the Indian Contract Act, there are certain agreements declared void, which are listed below:

When the contracting party enters into the agreement by mistake of essential fact. (Refer to Section 20 of the Indian Contract Act.)
An agreement is made without consideration. (Refer to Section 25 of the Indian Contract Act.)
An agreement is made for the restriction of marriage. (Refer to Section 26 of the Indian Contract Act.)
An agreement is made for the restriction of trade. (Refer to Section 27 of the Indian Contract Act.)
An agreement is made for the stopping of judicial proceedings. (Refer to Section 28 of the Indian Contract Act.)
An agreement that is not certain or incapable to meet certain. (Refer to Section 29 of the Indian Contract Act.)
An agreement which is made for wager. (Refer to Section 30 of the Indian Contract Act.)
An agreement that mentions any contingent and impossible event. (Refer to Section 36 of the Indian Contract Act.)
An agreement which is made on the basis of an impossible act or that act subsequently becomes impossible without the fault of contacting parties. (Refer to Section 56 of the Indian Contract Act.)
There are other legal requirements that need to be completed for making an agreement become a contract. Such as, if a contract is under a particular law which requires it to be in writing and registered, the legal requirements must be fulfilled to fulfil those conditions.
An agreement related to a time-barred debt.
An agreement that relates to immovable property.
If the agreement has an arbitration clause for the resolution process, the type of agreement must be made in writing and registered.

Conclusion:

A contract is a legally binding agreement that is made between two or more parties, for the purpose of doing something or not. But an agreement becomes a contract when certain conditions are met under the law. In the way of making an agreement to become a contract, the journey begins with the offer and acceptance, on the basis of consideration. The enforceability of a contract is a key factor which is applied only for the legally valid contract. There are certain remedies given in the event of breach of contract, which protect the rights of the contracting party towards a contract. So, after discussion of the above, we can explain that all contracts are covered under the purview of the agreement, but all agreements are not covered under the purview of the contract.