Section 10: What Agreements Are Contracts
Chapter Twenty-Two
Syllabus topic 2.1, "Essential Ingredients for Enforceability (Sections 10 – 30)"
Pages 99 to 103 of 462
In one line
Section 10 is the gate every agreement must pass through to become a contract, and the whole of this module is that one section opened out.
In the words a student can write in an exam: section 10 of the Indian Contract Act 1872 provides that "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." Five requirements sit in that sentence, and sections 11 to 30 are nothing but the Act's own definitions of them.
Why the law has this at all
By the end of Module I a student knows how an agreement is made: a proposal under section 2(a), an acceptance under section 2(b), and the two together producing a promise and then an agreement under section 2(e). What Module I never asked is whether the law will do anything about it.
That is a separate question, and it has to be. People agree to all sorts of things. A fourteen year old agrees to buy a motorcycle. A frightened man agrees at knifepoint to sell his shop. Two traders agree to fix prices unlawfully. Every one of those is an agreement in the section 2(e) sense: there is a proposal, there is an acceptance, and there are two consenting minds.
If the law enforced all of them it would be lending the courts, and ultimately the police, to a child, to a robber and to a conspiracy. So the Act draws a line, and section 10 is where the line is drawn. An agreement is the raw material. A contract is an agreement the law has agreed to back.
The provision itself
"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."
The section then adds a saving clause that students routinely miss:
"Nothing herein contained shall affect any law in force in India and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents."
Broken down: the requirements
Read section 10 with section 2(h), which defines a contract as "an agreement enforceable by law", and the structure becomes visible. There must first be an agreement, and that agreement must then answer to each of the remaining four.
- An agreement. Section 2(e): "Every promise and every set of promises, forming the consideration for each other." Without a proposal and an acceptance there is nothing for section 10 to work on. This is Module I's ground, taken up in [Agreement, Contract, and the Difference that Decides Cases].
- Free consent of the parties. Consent is defined in section 13 and freedom of consent in section 14. The five things that destroy freedom are coercion, undue influence, fraud, misrepresentation and mistake, and sections 15 to 22 define each.
- Parties competent to contract. Section 11 supplies the test: age of majority, soundness of mind, and not disqualified by any law.
- A lawful consideration and a lawful object. Consideration is defined in section 2(d); section 23 says when a consideration or an object is unlawful.
- Not expressly declared void by the Act. Sections 24 to 30 are the express declarations, and section 56 adds another.
Section 10: What Agreements Are Contracts
The saving clause, and why it matters in practice
The second paragraph of section 10 says the Act does not override any other law that requires writing, witnesses or registration. So an oral agreement can be a perfectly good contract under section 10 and still be unenforceable, or ineffective to pass property, because a different statute demanded a document.
The everyday examples a Mumbai student will meet are these. A sale of immovable property worth one hundred rupees or more requires a registered instrument under the Transfer of Property Act 1882. An arbitration agreement must be in writing under the Arbitration and Conciliation Act 1996. A promise to pay a time barred debt must be in writing and signed under section 25(3) of this Act itself.
So the correct statement is not "a contract must be in writing" and it is not "writing is never required". It is: this Act requires no writing, and other laws sometimes do, and section 10 preserves them.
What section 10 does NOT list, but the law requires anyway
Four things are part of the law of contract and are not written into section 10 at all, and they are a separate list from the five above. A student who recites only the section's own words will lose marks on any question that asks for the essentials of a valid contract.
An intention to create legal relations. A family arrangement to share housework, or an invitation to dinner, is an agreement with consent, competence, consideration in a loose sense and no unlawfulness. It is still not a contract, because neither party meant to be answerable in a court. The Act does not say so; the courts read it in.
Certainty of meaning. Section 29 declares void an agreement whose meaning is not certain or capable of being made certain. This is one of the express declarations, so it does sit inside section 10's fifth condition, but it is worth naming separately because it is easy to overlook. See [Agreements Void for Uncertainty].
Section 10: What Agreements Are Contracts
Possibility of performance. Section 56's first paragraph declares void an agreement to do an act impossible in itself. See [Impossibility of Performance, and Frustration].
Legal formalities where another law demands them. The saving clause above.
Void, voidable, illegal and unenforceable
These four words are used interchangeably by beginners and they mean four different things. Getting them wrong is the single commonest way to lose marks in this paper, so learn the table rather than the sentence.
| Term | Definition in the Act | Effect | Example |
|---|---|---|---|
| Valid contract | s.2(h), an agreement enforceable by law | binds both parties, courts will enforce | a signed and lawful sale of goods |
| Void agreement | s.2(g), "not enforceable by law" | a nullity from the beginning, no rights ever arose | an agreement with a minor, s.11 |
| Voidable contract | s.2(i), enforceable "at the option of one or more of the parties thereto, but not at the option of the other or others" | valid and binding until the party wronged chooses to set it aside | consent obtained by fraud, s.19 |
| Illegal agreement | not defined by name; consideration or object forbidden by law, s.23 | void, and collateral transactions fall with it | an agreement to smuggle goods |
| Unenforceable | not a statutory category | good in law but the court cannot act on it for a technical reason | an oral arbitration agreement |
Two distinctions carry the marks. First, a void agreement never had legal effect, while a voidable contract has full effect until it is avoided, so anything done under it in the meantime stands. Second, every illegal agreement is void but not every void agreement is illegal: an agreement in restraint of marriage under section 26 is void, but there is nothing unlawful about promising not to marry, and a related transaction is not tainted by it. An agreement to commit an offence is both void and illegal, and every collateral bargain built on it falls too.
A worked example
Farah, aged twenty six and of sound mind, agrees in writing to sell her flat in Andheri to Devendra for eighty lakh rupees. Devendra pays five lakh rupees as earnest money. Test the agreement against section 10.
- Agreement? Yes. Farah proposed, Devendra accepted, and each promise is the consideration for the other, so there is an agreement under section 2(e).
- Free consent? Yes, on these facts. Nobody threatened anybody, nothing was concealed, and there is no mistake.
- Competent parties? Yes. Both are over eighteen, of sound mind, and neither is disqualified.
- Lawful consideration and object? Yes. Money for a flat is lawful on both sides, and nothing in section 23 is offended.
- Expressly declared void? No. Nothing in sections 24 to 30 touches it.
Section 10: What Agreements Are Contracts
So it is a contract. Now apply the saving clause. Section 10 has been satisfied, but the sale of immovable property still requires a registered conveyance. The agreement to sell binds Farah and gives Devendra a right to sue, including a suit for specific performance under the Specific Relief Act 1963 taken up in Module IV. It does not by itself make him the owner of the flat.
Now change one fact. Farah is seventeen. The agreement fails requirement three, section 11 makes her incompetent, and the agreement is void from the beginning, not voidable. Devendra cannot sue for the flat, and his position on the five lakh rupees is the subject of [The Minor's Position: Necessaries, Restitution and Ratification].
What it does NOT mean
"Every agreement is a contract." The opposite. Section 10 exists precisely to say that only some agreements are. An easy way to hold it: all contracts are agreements, but not all agreements are contracts.
"A contract must be in writing and on stamp paper." Not under this Act. Section 10 requires no writing at all, and an oral contract is fully valid. Writing, witnesses and registration come from other statutes, which the saving clause preserves, and stamp duty is a fiscal requirement that goes to admissibility in evidence, not to formation.
"If consideration is small the contract is not valid." Section 10 requires consideration to be lawful, not adequate. Explanation 2 to section 25 says so expressly, and it is taken up in [Agreements Without Consideration Are Void, Unless].
"A void contract." The phrase is a contradiction and examiners notice it. If it is void it never became a contract, so the correct expression is a void agreement. The Act uses "void contract" only for a contract that becomes void later, for example under section 32 or section 56.
Quick revision
- Section 10: all agreements are contracts if made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and not expressly declared void.
- Contract, s.2(h) = an agreement enforceable by law. Agreement, s.2(e) = promise or set of promises forming the consideration for each other.
- The five requirements map to: agreement (s.2(e)), free consent (ss.13, 14), competency (s.11), lawful consideration and object (ss.2(d), 23), not expressly void (ss.24 to 30).
- Not in the section but still required: intention to create legal relations, certainty (s.29), possibility of performance (s.56), and formalities other laws demand.
- Saving clause: the Act does not displace any law requiring writing, witnesses or registration.
- Void, s.2(g), no effect ever. Voidable, s.2(i), good until avoided. Illegal, void plus collateral transactions fall too.
- All contracts are agreements; not all agreements are contracts.
Section 10: What Agreements Are Contracts
Test yourself
1. State section 10 and list the essentials of a valid contract. All agreements are contracts if made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and not expressly declared void. The essentials are an agreement, free consent, competency, lawful consideration, lawful object, and the absence of an express declaration of voidness, together with the intention to create legal relations, certainty, possibility of performance, and any formality another law requires.
2. Distinguish a void agreement from a voidable contract. A void agreement is not enforceable by law under section 2(g) and has no legal effect from the outset, so no rights arise under it at all. A voidable contract is enforceable at the option of the party whose consent was defective under section 2(i); it is valid and binding until that party avoids it, and everything done under it before avoidance stands.
3. Is an oral agreement a contract? Yes, so far as this Act is concerned. Section 10 nowhere requires writing. But the second paragraph of section 10 preserves other laws requiring writing, witnesses or registration, so an oral agreement may still fail for want of a form that a different statute demands.
4. Are all void agreements illegal? No. Every illegal agreement is void, because its object or consideration is unlawful under section 23, but many void agreements are perfectly innocent. An agreement in restraint of marriage is void under section 26 without being unlawful, and a transaction collateral to it is unaffected, whereas a transaction collateral to an illegal agreement falls with it.
5. A and B agree that A will pay B one lakh rupees if B murders C. Analyse under section 10. There is an agreement, and the parties may well be competent and consenting. It fails on lawfulness: the object is forbidden by law and the court would in any event regard it as opposed to public policy, so the consideration and object are unlawful under section 23 and the agreement is void under section 10 and illegal besides. No court will enforce it either way, and any collateral agreement, such as a loan taken to fund the payment, is tainted with the same illegality.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.