All agreements are not contracted, all contracts are agreements. Only those agreement which satisfies the essential elements given under section 10 of the Indian Contract Act, 1872 becomes the contract.
Definition of Agreement under Indian Contract Act, 1872
According to section 2(e) of the Indian Contract Act, 1872- every promise and every set of promises forming the consideration for each other in an agreement.
In an agreement, there is a promise from both sides. For example, A promises to deliver his watch to B, and in return B promises to pay the sum of Rs. 3,000 to A, there is said to be an agreement between A and B.
A promise is a result of an offer by one person and its acceptance by the other. For example, when A proposes to sell his watch to B for Rs. 3,000 and B accepts his proposal, there results in a promise between the two persons.
What is Promise, Offer, and Acceptance in an Agreement?
When the 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. Thus, when there is a proposal from one side and the acceptance of that proposal by the other side. It results in a promise. These promises from the two parties to one another is known as an agreement.
The term ‘proposal’ has been defined in section 2(a) of the Indian Contract Act, 1872- when one person signifies to another his willingness to do or to abstain from doing anything, to obtain the assent of that other to such act or abstinence, he is said to propose.
Acceptance should be communicated by the offeree to the other offeror. It should be absolute and unqualified. Acceptance should be made in some usual and reasonable manner unless the proposal prescribes the manner of acceptance. The acceptance should be made while the offer is still subsisting.
Essential Elements of Contract under Section 10 of the Indian Contract Act, 1872
All agreements are contract if they are 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 essential elements needed for a valid contract, therefore, are given below:
- An agreement between the two parties. An agreement is the result of a proposal or an offer by one party followed by its acceptance by the other.
- The agreement should be between the parties who are competent to contract.
- There should be a lawful consideration and lawful object in respect of that agreement.
- The agreement must not be one, which has been expressly declared to be avoided.
- There should be free consent of the parties when they agree.
Void Agreement under Indian Contract Act, 1872
Under section 2(g) of the Indian Contract Act, 1872, a void agreement means an agreement not enforceable by law is void. An agreement becomes a contract when enforced by law. A void agreement cannot be enforced by law. A void agreement is different from an avoidable agreement, where the agreement is rejected at the option of one of the parties to the agreement. An agreement can be a void agreement due to the impossibility of its performance. For example, if an agreement is formed between two parties but during the performance of the contract the object of the contract becomes impossible to achieve, then the agreement can be enforced in the court of law and is thus declared void.
There are some agreements under Indian Contract Act that are void ab initio agreements i.e. void from the beginning. The agreement was void as soon as it was created.
Section 26– Agreement in restraint of marriage: Any agreement that restricts any major person from marriage.
Section 27– Agreement in restraint of trade: Any agreement by which any person is restricted from doing trading or business activity or any profession.
Section 28– Agreement of restraint of legal proceedings: Any agreement that prevents any party to the agreement to enforce its legal rights.
Section 30– Wagering agreement: An agreement with a wager would be a void agreement as the agreement depends on the happening or non-happening of an uncertain event.
An agreement can be declared void agreement due to the following reasons:
- Parties to the agreement are not competent like under the valid legal age or incapacitated.
- The agreement is based on unlawful considerations like the promise of a physical relationship.
- The object of the agreement is unlawful.
- Consideration is absent on one side.
- The agreement restricts legal proceedings, trade, or marriage.
- The agreement is made on uncertain terms.
- Performance of the agreement is impossible.