Indian Contract Act 1872: Essentials of a Valid Contract, Consideration & Landmark Precedents

1. What Makes an Agreement an Enforceable Contract? (Section 10)

Section 2(h) of the Indian Contract Act, 1872 provides the foundational statutory definition: "An agreement enforceable by law is a contract." Hence, every contract comprises two essential components: an agreement (reciprocal promises backed by consideration) and statutory enforceability.

Under Section 10, all agreements are contracts if they are entered into:

1. By the free consent of parties competent to contract;
2. For a lawful consideration;
3. With a lawful object; and
4. Are not expressly declared to be void under statutory provisions.

2. Offer & Acceptance: Lalman Shukla and Carlill Cases

Lalman Shukla v. Gauri Datt (1913) 11 All LJ 489

Facts: A nephew went missing. The uncle sent his servant (Lalman) to trace him. Subsequently, the uncle announced a cash reward to anyone who brought back the nephew. Lalman found the boy before becoming aware of the reward notice.

Ratio: An acceptance cannot be made in ignorance of an offer. There must be an assent to the offer; a person who has no knowledge of an offer cannot accept it.

Carlill v. Carbolic Smoke Ball Co. [1893] 1 QB 256

Ratio: Established the doctrine of General Offers. An offer made to the public at large can be accepted by any member of the public performing the conditions specified in the advertisement, without prior communication of acceptance.

3. Capacity to Contract: The Mohori Bibee Principle

Under Section 11, every person is competent to contract who is of the age of majority according to the law to which he is subject, who is of sound mind, and who is not disqualified from contracting by any law.

In the historic Privy Council appeal of Mohori Bibee v. Dharmodas Ghose (1903) 30 IA 114, it was definitively laid down that a contract entered into by a minor is void ab initio (void from the very beginning), and cannot be enforced against the minor, nor can it be ratified upon attaining majority.