Sunday, March 29, 2020

What Is A Valid Agreement?

To begin understanding the concept and validity of an agreement, the baseline requirement is to fully understand the essence of the definition of this term. Agreement is defined as “a negotiated and typically legally binding arrangement between parties as to a course of action” in the Oxford Dictionary. 

Section 2(e) of the Indian Contract Act, 1872, defines agreement as thus: “Every promise and every set of promises, forming the consideration for each other, is an agreement”

According to Black’s Law Dictionary, the term “agreement” has been expounded as the following:

“A concord of understanding and intention, between two or more parties, with respect to the effect upon their relative rights and duties, of certain past or future facts or performances. The act of two or more persons, who unite in expressing a mutual and common purpose, with the view of altering their rights and obligations. A coming together of parties in opinion or determination; the union of two or more minds in a thing done or to be done; a mutual assent to do a thing. Agreements are of the following several descriptions, viz.: Conditional agreements, the operation and effect of which depend upon the existence of a supposed state of facts, or the performance of a condition, or the happening of a contingency. Executed agreements, which have reference to past events, or which are at once closed and where nothing further remains to be done by the parties. Executory agreements are such as are to be performed in the future. They are commonly preliminary to other more formal or important contracts or deeds, and are usually evidenced by memoranda, parol promises, etc. Express agreements are those in which the terms and stipulations are specifically declared and avowed by the parties at the time of making the agreement.”

I am not sure whether all of you read that or skipped it, so here's a summary of what an agreement is:
it is the result of proposal from one side and its acceptance by the other. 

Since a “valid agreement”, that is enforceable by law, is the basis for any contract, it is pertinent to look into the components or the elements that validate an agreement and make it possible to make it a contract enforceable by law. 

Section 10 of the Indian Contract Act, 1872, lays down the key points that make an agreement valid and enforceable as a contract in the eyes of law. The main validating features in an agreement, that can be understood through Section 10 of the Indian Contract Act, 1872, are the following: 
1. free consent of all parties entering into the contract
2. competency of all the parties entering into the contract
3. a valid consideration
4. a valid object
5. consensus ad idem or meeting of minds of all the parties entering into a contract
6. the act not being expressly declared to be void
Any agreement that we make that do not satisfy these criteria cannot be a valid agreement in the eyes of law. And, these are just the most basic and sine qua non of any valid agreement. Sometimes, an agreement that fulfills all of the criteria under Section 10 may need something more to make it valid in the eyes of law. 

For example, any agreement and contract for the transfer of a piece of land, or any other immovable property is to be registered compulsorily. A contract that does so without registration is invalid in the eyes of law even if it fully complies with Section 10.

So, we come back to the question: what is a valid agreement?

A valid agreement is one that
a. complies with Section 10 of the Indian Contract Act
b. complies with all mandatory requirements attached to the nature of the contractual agreement under any Indian Law
Fun question: Doesn't consensus ad idem remind you of 'A Horse and Two Goats' by R K Narayan? Or, is it just me every time I hear it?

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