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CA Foundation · Business Laws · The Indian Contract Act, 1872

Pooja, a resident of Surat, enters into an agreement with Ramesh under which Ramesh will pay her Rs 5,000 if she completes a painting of his house by 1 April, but the agreement was made without any intention of creating legal obligations, as they said it was only a friendly arrangement among neighbours. Which essential of a valid contract is lacking?

The missing essential is the intention to create a legal relationship. The parties expressly treated the arrangement as a friendly one among neighbours with no legal obligations, so it is a social agreement. Without such intention it cannot be enforced as a contract, even though money is mentioned.

  1. AFree consent
  2. BIntention to create legal relationshipCorrect
  3. CLawful object
  4. DCapacity of parties

Explanation

Agreements of a social or domestic nature, where the parties do not intend legal consequences, are not contracts. The facts say the parties treated it as a friendly arrangement without legal obligations, which shows intention is absent. Nothing suggests lack of consent, unlawful object or incapacity.

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