Valid Agreement

  • A contract is an agreement which is enforceable by law. Hence we use word contract it satisfies all legal requirement. Hence the word “Void contract” is wrong. It should be “void agreement”. Thus contracts can only be valid or voidable.
  • Section 10 of the Indian Contract Act – 1972 defines the criteria of valid contracts.

Section 10:

  • What agreements are contracts— All agreements are contracts 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.
  • Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.
  • Part-1 of section 1o0 gives criteria to call an agreement as a contract. Part-2 of section10 gives guidelines for a written contract as per other Acts.

Which agreements are said to be contracts? (Part 1 Section 10)

Valid Contract

  • An agreement is a contract if satisfies all the following criteria
  1. The agreement should be by the free consent (coercion, undue influence, misrepresentation, mistake or fraud) (section 13 to 22)
  2. The parties involved in the contract are competent. (Section 11 and 12)
  3. The agreement is for a lawful consideration and a lawful object. (Section 23 to 25)
  4. It is not an agreement expressly declared to be void. Social, moral and religious agreements are void w.r.t. contract. (Section 26 to 30)
  5. The agreement should be legally enforceable.
  • If any of this condition is not satisfied it is a void agreement and not a contract.

Written Contracts  (Part 1 Section 10):

  • The Contract Act does not require every contract to be in writing.
  • If a contract is to be in writing as required by the provisions of any other law, then it must also be in writing.
  • For example, as per the Companies Act, the memorandum and the Articles of Association must be in written form, then the contract law also insists it in a written form only. Similarly, by the Transfer of Property Act, all the documents like sale-deeds, leases, mortgage deeds must be in writing then the contract law also insists them in a written form only.
  • If by the Indian Registration Act, registration of documents is required then the contract law also insists that such requirements should be observed.
  • Acknowledgement to save the law of limitation is also required to be in writing by Sec. 18 of the Limitation Act, 1963. Submissions under the Arbitration Act are similarly required to be in writing.

Hand Witten Words on Printed Contract:

  • Handwritten changes or additions to a printed contract are part of the contract, as long as both / all parties to the contract agree to the changes/additions. The agreement is demonstrated by placing their initials and date of acceptance to changes next to the handwritten changes, each person placing their initials is signifying they have read the handwritten portion and are agreeing to it a part of the contract, just like the parts which are printed.
  • Not putting initials next to a written change in a contract can lead to one party attempting to say they never agreed to those terms which would likely lead to litigation.
  • Court has shown a view that the handwritten words reflect the real and immediate intention of the parties.

Case Law:

Case – 1: W & K Holdings (NSW) Pty Ltd v/s  Mayo [2013] NSWSC 1063:

  • The Supreme Court of New South Wales rectified a lease contract (made by the plaintiff and the defendant themselves without hiring a lawyer) on the basis that there were inconsistencies between the printed terms of a template lease and the handwritten terms. The Supreme Court, in this case, gave more weight to the hand-written provisions in the contract.
  • The court held that more weight should be given to the hand-written components as these required the particular attention of the drafter similarly they required the parties to put their mind to a provision.
  • Court further added that the conflicts may be avoided entirely. To avoid unnecessary issues and conflicts, let the lawyer prepare the contract for the parties in a clash of interpretation. They have the knowledge, skills and expertise to create a contract that will embody the real intention of parties, can protect your interests. The expense of a paying a lawyer to look over and draft every contract initially seem massive, however, that expense is often small compared to the cost of litigation.

Case – 2: Robertson v/s French (1803) 4 East 130:

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