Essentials of a Contract: What are the Key Components?

by  Adv. Priyanka Sampathy  




3 mins


What are the Essentials of a Contract?


  • The parties involved in a deal that is not a legitimate contract may face several issues. For this reason, we need to be completely informed of all the essentials of a Contract. 
  • The Essentials of a Contract are explicitly defined and listed in the Indian Contract Act 1872, or they can be interpreted in various judgments of the Indian judicial system. 
  • Section 10 of the Indian Contract Act lists several requirements for legal contracts, including free consent, the parties’ competence, and lawful compensation, among others. Let’s know all the essentials of a Contract.

Essentials of a Contract 

 Two Parties

  • You decide to sell your automobile to yourself. Let’s use the example of avoiding taxes or some other evil intent. Is that even conceivable? Can you get into an agreement with yourself? The answer is regrettably no. A contract with oneself is impossible.
  • At least two of the parties named in the Contract must be involved for it to be valid. The proposal will be made by one of these parties, and the other will ultimately accept it. One of the essentials of a Contract is that there must be two parties. 
  • Both parties must be either natural people or have what is known as a legal existence, such as businesses, institutions of higher learning, or other organizations.

2.     Legal obligation

  • A contract must be intended to establish a legal relationship between the parties to it. The legal obligation is also one of the essentials of a Contract. 
  • This indicates that agreements that are not legally binding cannot be made into a contract since they cannot be enforced in a court of law, such as social or domestic agreements between family or neighbors.

    Consult With Our Experts For Accurate Guidance And Ensure Compliance With Drafting A Contract

3.     Case-Specific Agreements

  • Certain essentials of a Contract are unique and, if not met, would render them void or unenforceable. For instance, unless it is in writing, the Contract of Insurance is not a legal contract.
  • Similar to this, for transactions involving immovable property, registration of the Contract is required by law for it to be enforceable.

4.     Clarity of Intent

  • Take the following sentence as an example: “I agree to pay Mr. X a desirable price for his house in the such-and-such area.” 
  • Even if all parties concur with this clause, is this agreement still enforceable? Of course, it cannot be, as the term “ideal quantity” is vague and undefined. 
  • As a result, we state that a legal contract needs to be clear in its intent, and it is one of the essentials of a Contract. 

5.     The prospect of Performance of a Contract

  • Imagine that two individuals decide to enter into a contract wherein Person A offers to revive Person B’s deceased relative. 
  • This is not legitimate even if all parties concur and all other contract requirements are met since it is impossible to bring someone back from the dead. 
  • As a result, neither the Contract nor the agreement may be enforced. Therefore, one of the essentials of a Contract is that there must be some prospect of performance of the Contract. 

6.     Free Consent

  • One of the essentials of the Contract is consent. An agreement, and hence a legitimate contract, depends on consent. 
  • Two parties are said to have consented to a promise if they come to the same understanding in the same meaning. 
  • However, for a contract to be legally binding, both parties must have given their assent freely, which implies that neither party may have been persuaded to agree by coercion, false representation, or trickery. 

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7.     Competency of Parties

Section 11 of the Indian Contract Act of 1872 reads as follows: 

Every person who is 

  • of the age of majority under the law to which he is subject, 
  • of sound mind, and 
  • not precluded from contracting by any legislation to which he is subject is competent to enter into a contract.

Let’s examine these essentials of a Contract in more detail:

  • Refers to the requirement that the individual is at least 18 years of age.
  • Indicates that at the time the Contract was drafted, the party or individual should be able to fully grasp the terms or promises of the Contract.
  • The party should not be disqualified due to any further legal repercussions, according to the clause. 
  • A person cannot enter into a contract, for instance, if they are a criminal, a foreign sovereign, an adversary from another planet, etc.

8.     Consideration

  • Quid Pro Quo, which is Latin for “something in return,” requires the parties to receive something of value in the form of profit, rights, interests, etc. Consideration is also one of the essentials of a Contract. 
  • For instance, if you decide to sell your watch to a friend for Rs. 500, your promise to transfer the rights to the watch to your friend counts as a consideration. You should also take your friend’s pledge to pay Rs. 500 into account.
  • There are certain conditions in which a Contract is valid without one of the essentials of a Contract being a consideration. Therefore, it is recommended to take legal consultation. Legal consultation helps you to know all the essentials of a Contract.

9.     Must be Lawful

According to Section 23 of the Indian Contract Act, illegal factors are any that: 

  • Are prohibited by law.
  • It is fraudulent or of a character that, if authorized, would violate any legal prohibitions.
  • Entails or indicates harm to another individual’s person or property.
  • The Court views it as unethical or against public policy

The agreement will be invalid due to these requirements. Therefore, one of the essentials of a Contract is that it must be lawful. 

All of these essentials of the Contract must be fulfilled while entering into an employment agreement. To get the employment agreement drafted, one must consult a lawyer. 

Take Advice From Our Experts On Drafting A Contract


Several essentials of a Contract must be fulfilled before entering into a contract. Therefore, it is recommended to consult a lawyer who can help you to get your Contract drafted. Consulting a lawyer not only saves time but also gives you an edge over others. 

Several essentials of a Contract must be fulfilled before entering into an Employment Contract. Consult a lawyer to get an Employment Contract drafted.

Adv. Priyanka Sampathy

Adv. Priyanka Sampathy


5 | 163+ User Reviews

Priyanka Sampathy is a legal consultant who prioritises ethical and professional conduct while striving to achieve desired outcomes. With over 15 years of independent practice, she has significant expertise in handling legal cases. Her exceptional communication skills enable her to express arguments in a clear and persuasive manner, both in writing and verbally, in Hindi, English, and Telugu.

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