Legal Guide

What agreements are contracts under Section 10 of the Indian Contract Act?

by Bhavya Choudhary · 3 min read

Section 10 of Indian Contract Act

Section 10 of the Indian Contract Act

The essentials of a contract are discussed under Section 10 of the Indian Contract Act. Section 10 of the Indian Contract Act asserts that all agreements are contracts if they fulfill the following conditions: 

  • valid consideration
  • free consent
  • Consideration
  • Competency
  • have not been explicitly declared invalid
  • Nothing in the provision, which is not specifically repealed, shall affect any legislation governing the registration of documents or any law requiring that contracts be executed in writing or in the presence of witnesses that is in existence in India

What agreements are contracts?

  • Every promise or group of promises that serves as the consideration for one another is considered an agreement under Section 2(e) of the Contract Act. Thus, it is possible to define a promise as an agreement.
  • A contract is defined as an agreement that is legally enforceable under Section 2(h) of the act. A contract may also be defined as an agreement whose goal is to establish a legal obligation or a responsibility that is enforceable by law if it fulfills all the conditions under Section 10 of the Indian Contract Act. 
  • All contracts are agreements, but not all agreements are agreements. The agreement is a broader phrase than a contract. Contracts are agreements that meet the requirements outlined in Section 10 of the Indian Contract Act of 1872.

Agreements are classified into two categories:

  • Agreements that are not legally enforceable because they do not meet the requirements of a valid contract under Section 10 of the Indian Contract Act cannot be regarded as contracts since they are not legally enforceable. 

Such agreements are deemed to be null and invalid under section 2(g) of the act. An agreement made by a minor, for instance, is deemed invalid. The act’s section 24-30 lists the types of contracts that are invalid.

  • Agreements that meet the requirements for legally binding contracts under Section 10 of the Indian Contract Act are those that are enforceable by law.

Thus, Section 2(h) and Section 10 of the Indian Contract Act outline the necessary components of a legal contract. Any of those components that are missing from or present in an agreement will undermine its legality and prevent it from being a legally binding contract.

A contract becomes a statutory contract if we enter into it with the established terms and conditions, which are required by law. If a contract contains statutory terms and conditions, the contract is statutory to the degree that it does so.

The agreement must be approved by both parties for it to be considered a contract.

Essential elements of a valid contract under Section 10 of the Indian Contract Act

Offer and acceptance

When there are at least two parties, one of whom makes an offer, and the other accepts it, a contract can develop. To proceed, one side must make an offer, and the other party must accept it. When the offer is accepted, a contract is formed. The offeror is the one who makes the offer, and the offeree is the party to whom the offer is made.

Consensus ad idem

The parties entering into the contract must agree upon the same item in the same sense, or they cannot enter into the deal. It implies that there must be an agreement in that regard (i.e. meeting of minds).

Legal Relationship

A contract must be intended to create a legal relationship between the parties. It only becomes a problem when both parties are aware that if one of them breaks his commitment, the other would be held responsible for the contract’s failure.

There is no contract between the parties if there is no desire to establish a formal relationship. Because they do not consider or give birth to a legal relationship, agreements of a social or domestic character are not regarded as contracts.

Competency of parties

Section 10 of the Indian Contract Act states that the parties must be competent to enter into a contract. Section 11 of the Contract Act states that A person is regarded as competent to enter into a contract if: 

  • He has reached the age of majority; 
  • He is of sound mind; and 
  • He is not barred from doing so by any laws to which he is subject.

The following individuals, however, are deemed incapable of entering into contracts or only capable of doing so to a limited degree under Section 10 of the Indian Contract Act

Free consent

Section 10 of the Indian Contract Act provides that there should be free consent of the parties. Two or more people are considered to consent to a common item under section 13 of the act when they agree to the same thing in the same meaning. 

Consent is seen to be the most essential part of a contract under Section 10 of the Indian Contract Act. The free consent discussed in the next section is necessary for a contract to be enforceable. When none of the following factors—

  • coercion, 
  • undue influence, 
  • fraud, 
  • misrepresentation, or 
  • error

contribute to consent, it is considered to be free and legitimate under Section 10 of the Indian Contract Act.

When one of these factors results in the loss of consent, the party whose consent was lost may choose to nullify the agreement according to Section 10 of the Indian Contract Act. However, if the consent was given inadvertently, the agreement is regarded as invalid.

Lawful consideration and lawful object

Section 10 of the Indian Contract Act specifically provides that there must be lawful consideration and a lawful object. The following considerations and objects are not regarded as legal under section 23 of the Indian Contract Act: 

  • If it is prohibited by law, 
  • If it violates the terms of another law, 
  • If it is fraudulent, 
  • If it harms another person’s person or property, 
  • If it is deemed to be immoral or contrary to public policy by the court.

Therefore, a contract that contains such illegal clauses is not regarded as being a genuine contract under Section 10 of the Indian Contract Act.

A Masters service agreement, non-disclosure agreement, and Employment Contract

To make an agreement a contract, all the conditions laid down under Section 10 of the Indian Contract Act must be fulfilled. 

A masters service agreement, non-disclosure agreement, and Employment Contract can be made enforceable by law if conditions laid down under Section 10 of the Indian Contract Act are fulfilled. 

Conclusion

All contracts are agreements but all agreements are not contracts if it does not fulfill all the requirements laid down under Section 10 of the Indian Contract Act. To make an agreement enforceable by law, all the requirements must be fulfilled and for this, it is necessary to consult a lawyer.

To make an agreement a contract, it must contain all the essentials of Section 10 of the Indian Contract Act. To get the service agreement drafted, consult a lawyer right away.

Bhavya Choudhary

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Bhavya Choudhary

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