Business Laws · The Indian Contract Act, 1872

Essentials of a Valid Contract and Types of Contracts

Updated 4 October 2026

A contract is an agreement enforceable by law (Section 2(h)). To be valid, an agreement needs offer and acceptance, consideration, capacity, free consent, lawful object and consideration, and must not be declared void. Section 2 recognises void agreements, contracts, voidable contracts and contracts that become void. Textbooks also classify contracts by performance (executed, executory).

Understand Essentials of a Valid Contract and Types of Contracts

Start with the chain in Section 2. A proposal is made when one person signifies willingness to do or abstain from doing something, to get the other's assent (Section 2(a)). When the other person assents, the proposal is accepted and becomes a promise (Section 2(b)). The proposer is the promisor; the acceptor is the promisee (Section 2(c)).

Every promise, and every set of promises forming the consideration for each other, is an agreement (Section 2(e)). An agreement enforceable by law is a contract (Section 2(h)). So: agreement = promise(s) + mutual consideration. Contract = agreement + legal enforceability. All contracts are agreements, but not all agreements are contracts. A promise to attend a friend's party is an agreement, but it is not meant to be enforced by law, so it is not a contract.

For an agreement to be enforceable, it must meet the essentials: two or more parties; offer and acceptance; consideration; capacity of parties; free consent; lawful object and consideration; and it must not be expressly declared void. Also, there must be an intention to create legal relations, which courts look at in social and domestic arrangements. In some cases the law also needs writing or registration (for example, Section 25(1) for a promise made out of natural love and affection).

Now the classification by enforceability. Section 2 itself speaks of four things:

A void agreement is an agreement not enforceable by law (Section 2(g)).
A contract is an agreement enforceable by law (Section 2(h)). A contract that meets all the essentials is commonly called a valid contract.
A voidable contract is enforceable by law at the option of one or more of the parties, but not at the option of the other or others (Section 2(i)). Typically the party whose consent was not free holds the option.
A contract that ceases to be enforceable becomes void when it ceases to be enforceable (Section 2(j)), for example by supervening impossibility under Section 56.

Textbooks add two more labels that are not statutory categories under Section 2. An illegal agreement is one forbidden by law. It is void, and textbooks note that it carries penal consequences and can affect related (collateral) transactions. An unenforceable contract is, in textbook usage, one that is good in substance but cannot be enforced because of a technical defect, such as a lack of required writing or a time bar. Use these two labels as textbook terms, and do not cite them as Section 2 classifications.

By performance (also a textbook classification): an executed contract is one where both sides have fully performed. An executory contract is one where one or both sides still have something to do. Executed vs executory is about performance, not validity, so a void agreement can still be executed in fact.

Key rules to remember

Proposal: Proposal = willingness signified to another, to obtain his assent (Section 2(a)); Willingness must be communicated with a view to getting assent.
Promise: Proposal + acceptance = Promise (Section 2(b)); Acceptance must be by the person to whom the proposal is made.
Agreement: Agreement = Promise(s) forming consideration for each other (Section 2(e)); Reciprocal promises form consideration for each other (Section 2(f)).
Contract: Contract = Agreement + enforceable by law (Section 2(h)); Every contract is an agreement, but not every agreement is a contract.
Void agreement: Void agreement = agreement not enforceable by law (Section 2(g)); Void from the start (void ab initio) in the sense that it never creates legal rights.
Voidable contract: Voidable contract = enforceable at the option of one party, not the other (Section 2(i)); Valid until the entitled party rescinds it.
Contract becoming void: Contract that ceases to be enforceable becomes void when it so ceases (Section 2(j)); Example: supervening impossibility under Section 56.
Restoration of advantage: Advantage received under a void agreement or a contract that becomes void must be restored or compensated for (Section 65); Applies when an agreement is discovered to be void or a contract becomes void.
Essentials checklist: Offer + acceptance + consideration + capacity + free consent + lawful object + not declared void (+ intention to create legal relations; writing/registration where law requires); Use this as your answer skeleton.

How to solve Essentials of a Valid Contract and Types of Contracts questions

Most questions give a short fact pattern and ask whether there is a valid contract or what type of agreement it is. Use the same sequence each time.

1Identify the parties and what each promised. Check that there is a proposal and an acceptance (Section 2(a), (b)).
2Check consideration (Section 2(d)): is there something given at the promisor's desire? A promise without consideration is void under Section 25, unless an exception applies.
3Check capacity and free consent. Was a party a minor, of unsound mind or disqualified? Was consent obtained by coercion, undue influence, fraud, misrepresentation or mistake?
4Check object and consideration for legality. If any part of a single consideration or object is unlawful, the agreement is void (Section 24).
5Check any special requirement: writing, registration, or a clause that makes the agreement expressly void (such as an agreement in restraint of trade under Section 27).
6Classify using Section 2: contract (valid), void agreement, voidable contract, or contract that has become void. Mention the textbook labels illegal or unenforceable only if the facts call for them.
7State the consequence: who can enforce it, who can rescind it, and whether any benefit must be returned (Section 65).
8Write the conclusion in one line, then add whether the contract is executed or executory if the question asks.

Quickest way: Provision-Facts-Conclusion in four lines

When to use it: Use it for 4-5 mark fact-based questions where time is short.

Line 1, provision: write the rule with the section, such as 'An agreement enforceable by law is a contract (Section 2(h)).'
Line 2, facts: apply the rule to the names and amounts in the question. Use the same names as the question.
Line 3, conclusion: say 'valid', 'void' or 'voidable' in plain words.
Line 4, consequence: add one line, such as 'A may rescind' or 'advance must be refunded (Section 65)'.
Memory aid for essentials: O-A-C-C-F-L-N = Offer, Acceptance, Consideration, Capacity, Free consent, Lawful object, Not declared void.
Memory aid for types: V-V-V-I-U = Valid, Void, Voidable, Illegal, Unenforceable (the last two are textbook labels, not Section 2 categories).

Common mistakes in Essentials of a Valid Contract and Types of Contracts

Writing that agreement and contract mean the same thing.
In daily speech both words are used interchangeably.
Fix: Always write: contract = agreement + enforceable by law (Section 2(h)). Add that every contract is an agreement but not every agreement is a contract.
Calling a voidable contract void, or the reverse.
Both words sound alike and both involve a defect.
Fix: Void is not enforceable by anyone. Voidable is valid until the aggrieved party chooses to rescind it. Link voidable to defective consent, such as fraud or misrepresentation.
Treating an illegal agreement as the same as a void agreement.
Both are not enforceable.
Fix: Say that every illegal agreement is void, but a void agreement need not be illegal. Illegal agreement is a textbook label for an agreement forbidden by law, and textbooks note it can affect collateral transactions. Do not present it as a Section 2 category.
Mixing up executed/executory with valid/void.
Students link the word 'executed' with 'enforceable'.
Fix: Executed and executory describe performance. Valid, void and voidable describe enforceability. They are separate classifications.
Forgetting Section 65 when a void agreement has been partly performed.
Students stop after saying 'void' and do not discuss money already paid.
Fix: Add that anyone who received an advantage under a void agreement must restore it or compensate for it. For example, an advance paid for a singer who falls too ill to sing must be refunded.
Saying a promise without consideration is always void.
Students remember the main rule but not the exceptions.
Fix: State Section 25: it is void unless it falls in an exception, namely a registered written promise out of natural love and affection between near relations, a promise to compensate for a past voluntary act, or a written signed promise to pay a time-barred debt.

Worked examples

Example 1

A and B agree that A shall pay B ₹1,000, for which B shall afterwards deliver to A either rice or smuggled opium. Is the agreement valid?

Show the solution

Provision: Section 58 says that when an alternative promise has one legal branch and one illegal branch, only the legal branch can be enforced.
Facts: B's alternative promise is to deliver rice (legal) or smuggled opium (illegal).
Application: The rice branch is lawful and can be enforced. The opium branch has an unlawful object and is a void agreement.
Classification: The agreement is a valid contract as to the rice and a void agreement as to the opium.

Answer: It is a valid contract to deliver rice and a void agreement as to the opium. Only the legal branch can be enforced (Section 58).

Example 2

A contracts to sing at B's concert for ₹1,000, paid in advance. A is too ill to sing. Discuss the rights of B.

Show the solution

Provision: Section 65 says a person who has received an advantage under a contract that becomes void, or under a void agreement, must restore it or make compensation for it.
Facts: B paid ₹1,000 in advance. A could not sing because of illness.
Section 56 link: Illustration (e) to Section 56 says that where A is too ill to act on some occasions, the contract becomes void on those occasions. So the contract is void only as to the occasions on which A is too ill, not automatically from the day the illness began.
Section 65 illustration (d): on facts like these, A must refund the ₹1,000 advance to B.
Limit: A is not bound to compensate B for the loss of profits B would have made if A had been able to sing.
Performance label (textbook): B has performed by paying, and A has not, so the contract is executory.

Answer: A must refund the ₹1,000 advance under Section 65 (illustration (d)). A is not liable for B's lost profits. Under Section 56 illustration (e), the contract becomes void only on the occasions when A is too ill to sing.

Exam tips

Quote the Section 2 clause by number in definition answers: 2(a) proposal, 2(b) promise, 2(e) agreement, 2(g) void, 2(h) contract, 2(i) voidable, 2(j) contract becoming void.
For 'distinguish' questions, answer in a two-column list style with 3-4 points: meaning, section, enforceability and example.
In fact-based questions, name each person from the question and end with a one-line conclusion. Markers look for the conclusion.
Learn one clear example for each type, since examples are usually worth marks in definition answers.
Do not guess a section number you are unsure of. Explain the rule in plain words with correct conditions.

Practice questions from The Indian Contract Act, 1872

Essentials of a Valid Contract and Types of Contracts: frequently asked questions

What is the difference between a void and a voidable contract?

A void agreement is not enforceable by law (Section 2(g)). A voidable contract is enforceable at the option of one party but not the other (Section 2(i)), and it stays valid until that party rescinds it. Voidable usually arises from defective consent.

Is every agreement a contract?

No. An agreement becomes a contract only when it is enforceable by law (Section 2(h)). Agreements without consideration or with an unlawful object are void, and purely social promises are not meant to create legal obligations.

What are the essentials of a valid contract?

There must be offer and acceptance, consideration, capacity of parties, free consent, lawful object and consideration, and the agreement must not be expressly declared void. Intention to create legal relations is also needed, and writing or registration where the law requires it.

What is the difference between executed and executory contracts?

In an executed contract, both parties have fully performed their promises. In an executory contract, one or both parties still have to perform. This is a textbook classification about performance, not validity.

Is an illegal agreement the same as a void agreement?

Not exactly. Every illegal agreement is void, but not every void agreement is illegal. Illegal agreement is a textbook label for an agreement forbidden by law, and textbooks note it can affect related transactions, while a void agreement may simply lack something like consideration.