HOW TO MAKE A CONTRACT ENFORCEABLE?

Adv (Dr.)Rajkumar S Adukia

International Legal Counsel, Motivational speaker and Growth Coach

Author of 300 plus books, 

B.Com (Hons.), FCA, FCS, FCMA, LL.B, MBA, M.Com, IP, MBF, DipIFRS (UK), DLL&LW, DIPR, Dip in Criminology, Ph.D.

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“All contracts are agreements, but all agreements are not contracts.”

Over the years of our life we have time and again indulged in agreements which are non-enforceable contracts. In order to give legal value and enforceability to an agreement, it is essential to register it as a contract in accordance with The Indian Contract Act, 1872. 

Many individuals have the misconception that a contract only refers to those written contracts or sale, mortgage, rent, lease, partnership, will, and so on. However, that is not true. We as individuals have encountered many direct or implied contract in our day to day life without even realizing it.An individual buying a bus ticket is an implied contract which provides the buyer with the right to travel in the bus till a location for which a specified amount is to be paid. 

In order to understand what constitutes a contract we first need to understand what the essentials which are mandatory to a contract are. A contract is considered to be valid only if it has two or more competent parties, an adequate consideration, free consent of both parties to enter into the contract and lawful object. 

A contract first of all requires for a “communication of proposal” to be made followed by the “communication of acceptance” of the proposal by the other party which can either be absolute or by performance of conditions.

A very good example for communication of proposal in daily life is the putting up of advertisements by sellers about a particular product or service that is offered to have been provided at a fixed amount. Here, the customer going to the shop or dealer availing the services or product is the acceptance of the proposal which is communicated by way of performance i.e. the act of purchasing such product or service. 

When it comes to contract there are various precautions that are to be taken: 

• The contract should be valid under The Indian Contract Act, 1872 failing which the contract will be considered to be void or voidable depending on the nature of the default.
• The contract has to be made between two or more “competent” parties which implies that the parties should have attained the age of majority (18 years) as specified under TheMajority Act, 1875.
• The contract should be made with a Lawful Object. For example, a contract to attack or kill someone for money will be rendered void as the object of act is truly illegal and punishable under the law.
• The contract should have a consideration; this consideration may be monetary or non-monetary. For example, providing raw material and receiving finished good as a result is a non-monetary consideration whereas, paying money to buy a particular good or service is a monetary consideration.
• The contract should be entered into by free consent of all the parties. This implies that any contract wherein any of the party is forced to sign is rendered invalid and void.
• Ensure there is an arbitration clause in the contract.

Steps to be followed in execution of a contract:

1. There needs to be an offer or proposal drafted.
2. The offer or proposal has to be communicated to the other party/s.
3. The other party has to communicate the acceptance or revocation of the said offer/ proposal. This can be done by:
4. Expressed: By providing verbal or written acceptance or revocation of offer or proposal.
5. Implied: By either performance or non-performance of the offer made.
6. Once the above steps are fulfilled the contract is to be drafted in the legally specified format.

A contract may be revoked by:

1. Communication of notice.
2. Non-performance of terms of the contract.
3. Death or insanity of the proposer.
4. Lapse of reasonable time.

In order to understand what is a contract and how it is executed the above mentioned points are to be carefully understood.