The essential elements of valid contract as follows:
1. Offer and acceptance- There must be a ‗lawful offer‘ and a ‗lawful acceptance‘ of the offer, thus resulting in an agreement. The adjective ‗lawful‘ implies that the offer and acceptance must satisfy the requirements of the Contract Act in relation thereto.
2. Intention to create legal relation-There must be an intention among the parties that the agreement should be attached by legal consequences and create legal obligations. Agreements of social or domestic nature do not contemplate legal relations, and as they
do not give rise to a contract e.g. an agreement to dine at a friend‘s house or a promise to buy a gift for wife are not contracts because these do not create legal relationship. In commercial agreements an intention to create legal relations is presumed. Thus, an
agreement to buy and sell goods intends to create legal relationship is a contract provided other requisites of valid contract are present.
3. Lawful Consideration-Consideration has been defined as the price paid by one party for the promise of the other. An agreement is legally enforceable only when each of the parties to it gives something and gets something. The something given or obtained is the
price for the promise and called consideration.
4. Free Consent- Free consent of all parties to an agreement is another essential element of a valid contract. ‗Consent‘ means that the parties must have agreed upon the same thing in the same sense. There is absence of ‗free consent‘; if the agreement is induced by
- undue influence,
- Mis-representation, or
5. Lawful object- For the formation of a valid contract, it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or property of another.
6. Possibility of Performance – Another essential feature of a valid contract is that it must be capable of performance. If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law.
7. Capacity to contract – The parties to an agreement must be competent to contract, otherwise it cannot be enforced by a court of law. In order to competent to contract, the parties must be of the age of majority and of sound mind and must not be disqualified from contracting by any law to which they are subject.