Agreement and Its Essential Elements –
Detailed Explanation with Sections & Act
An agreement is the foundation of a contract. It is a mutual understanding between two or
more parties regarding their rights and obligations. The Indian Contract Act, 1872, defines
and governs agreements, stating which agreements are legally enforceable.
1. Definition of Agreement (Section 2(e) of the 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, is an
agreement."
Key Elements from the Definition:
✔ Two or more parties must be involved in the agreement.
✔ There must be a promise (proposal + acceptance).
✔ The agreement should involve consideration (something in return).
Example:
A agrees to sell his car to B for ₹5 lakh.
A promises to transfer ownership, and B promises to pay ₹5 lakh.
This is an agreement because it includes mutual promises and consideration.
2. Agreement vs. Contract
The terms agreement and contract are related but not identical.
Basis Agreement Contract
Every promise forming
Definition A legally enforceable agreement
consideration for each other
Legal
May or may not be enforceable Always legally enforceable
Obligation
Scope Broader term A subset of an agreement
A promises to meet B for lunch (not A agrees to sell his bike to B for
Example
legally binding) ₹40,000 (legally binding)
📝 Important Rule:
All contracts are agreements, but not all agreements are contracts.
An agreement becomes a contract only if it meets the conditions of Section 10.
3. Essential Elements of a Valid Agreement
For an agreement to be legally valid and enforceable, it must fulfill the conditions under
Section 10 of the Indian Contract Act, 1872.
(i) Offer and Acceptance (Section 2(a) & 2(b))
There must be a lawful offer made by one party and lawful acceptance by another.
The offer and acceptance must be clear and unambiguous.
Example:
A offers to sell his car to B for ₹3 lakh. B accepts. This forms a valid agreement.
(ii) Intention to Create Legal Relationship
The agreement must be legally binding, not a social or moral agreement.
Example:
A promises to take B for dinner. If A does not take B, B cannot sue A because it is a
social agreement.
(iii) Lawful Consideration (Section 2(d))
Consideration means "something in return."
It must be real, lawful, and have some value.
Example:
A sells his mobile phone to B for ₹10,000. The phone and money are consideration.
✖ Invalid Consideration Example:
A promises to pay B ₹10,000 if B helps him in smuggling. This agreement is void
because smuggling is illegal.
(iv) Capacity to Contract (Section 11)
The parties must be:
✔ Major (above 18 years)
✔ Of sound mind
✔ Not disqualified by law (e.g., an insolvent person cannot enter a contract)
Example:
A minor agrees to sell his bike to B. This agreement is void because A does not have
contractual capacity.
(v) Free Consent (Section 13 & 14)
Consent must be free and not obtained by:
✖ Coercion (Section 15): Forcing someone to agree.
✖ Undue influence (Section 16): Exploiting a weaker party.
✖ Fraud (Section 17): Deliberate deception.
✖ Misrepresentation (Section 18): False statement made unknowingly.
✖ Mistake (Section 20-22): Wrong beliefs by one or both parties.
Example:
A threatens to kill B if he does not sell his land for ₹1 lakh. This agreement is
voidable due to coercion.
(vi) Lawful Object (Section 23)
The object of the agreement must be legal and not against public policy.
Example:
A agrees to pay B ₹50,000 for stealing C’s car. This agreement is void because it
involves an illegal act.
(vii) Possibility of Performance (Section 56)
The agreement must be physically and legally possible to perform.
Example:
A agrees to bring back a dead person to life for ₹10 lakh. This agreement is void
because it is impossible.
(viii) Certainty of Terms (Section 29)
The agreement terms must be clear and certain.
✖ Example of an Uncertain Agreement:
A agrees to sell "some quantity of wheat" to B.
This is not enforceable because the quantity is uncertain.
(ix) Agreements Not Expressly Declared Void (Section 24-30)
Certain agreements are automatically void, such as:
Agreements in restraint of trade (Section 27).
Agreements in restraint of marriage (Section 26).
Wagering agreements (Section 30).
Example:
A promises to pay B ₹1 lakh if India wins the cricket match. This is a wagering
agreement and is void.
4. Types of Agreements
(i) Valid Agreement
Meets all legal requirements under Section 10.
Can be enforced by law.
(ii) Void Agreement (Section 2(g))
Not enforceable by law.
Examples:
Agreement with a minor.
Wagering agreements (betting, gambling).
(iii) Voidable Agreement (Section 2(i))
Valid until one party cancels it.
Arises due to coercion, fraud, misrepresentation, or undue influence.
Example:
A signs a contract under threat. Later, he can cancel the contract.
(iv) Illegal Agreement
Forbidden by law and involves criminal activities.
Example:
A contract for drug smuggling is illegal.
(v) Unenforceable Agreement
A valid agreement but cannot be enforced due to legal technicalities.
Example:
An agreement without proper stamp duty.
5. Case Laws Related to Agreement
(i) Balfour v. Balfour (1919)
A husband promised his wife an allowance but later stopped paying.
The court held that social agreements are not enforceable contracts.
(ii) Mohori Bibee v. Dharmodas Ghose (1903)
A minor took a loan and later refused to repay.
The court ruled that a contract with a minor is void.
Conclusion
An agreement is a promise with consideration and becomes a contract if it meets the
legal conditions of Section 10. To be valid, an agreement must be lawful, made with free
consent, and between competent parties.
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