For a contract to be valid, there must be lawful consideration, competent parties, and free consent. Many disputes arise when consent is not free due to coercion, undue influence, fraud or misrepresentation. This topic explains these essentials in an exam-oriented way with clear differences and effects.
Consideration is “something in return” for a promise—an act, abstinence or promise done at the desire of the promisor.
Example: A promises to sell goods and B promises to pay price. Price is consideration for goods and goods are consideration for price.
General rule: agreement without consideration is void.
Common exceptions (concept level):
Capacity means legal competence of parties to enter into a contract.
A person is competent if he/she:
A minor’s agreement is generally void. However, in certain situations, law may protect minors (e.g., necessaries supplied to minor are reimbursable from minor’s property).
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Rules of consideration (any three):
Exceptions (any three):
(Other exceptions as per syllabus may be accepted.)
Business law encompasses all of the laws that dictate how to form and run a business. This includes all of the laws that govern how to start, buy, manage and close or sell any type of business. Business laws establish the rules that all businesses should follow.
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For a contract to be valid, there must be lawful consideration, competent parties, and free consent. Many disputes arise when consent is not free due to coercion, undue influence, fraud or misrepresentation. This topic explains these essentials in an exam-oriented way with clear differences and effects.
Consideration is “something in return” for a promise—an act, abstinence or promise done at the desire of the promisor.
Example: A promises to sell goods and B promises to pay price. Price is consideration for goods and goods are consideration for price.
General rule: agreement without consideration is void.
Common exceptions (concept level):
Capacity means legal competence of parties to enter into a contract.
A person is competent if he/she:
A minor’s agreement is generally void. However, in certain situations, law may protect minors (e.g., necessaries supplied to minor are reimbursable from minor’s property).
Consent means parties agree upon the same thing in the same sense. Consent is free when it is not caused by:
Coercion means committing or threatening to commit any act forbidden by law, or unlawful detaining/threatening to detain property, to force a person to enter into an agreement.
Effect: contract is voidable at the option of the party whose consent was obtained by coercion.
Undue influence occurs when one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage.
Effect: contract is voidable; court may set aside or modify terms.
Fraud includes intentional false statements, active concealment of facts, or any act fitted to deceive.
Effect: contract is voidable; the aggrieved party may rescind and also claim damages (subject to conditions).
Misrepresentation is a false statement made innocently (without intent to deceive) that induces the other party to enter into a contract.
Effect: contract is voidable; remedy is generally rescission and restoration; damages are usually not available like fraud (exam-friendly distinction).
Mistake may be of fact or law. Certain mistakes can make an agreement void (especially mutual mistake of essential fact).
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Consideration means something in return for a promise. It may be an act, abstinence or promise done at the desire of the promisor. Consideration is one of the important essentials of a valid contract.
General rule: No consideration, no contract—an agreement without consideration is void.
Common exceptions:
Thus, consideration is generally necessary, but law recognizes certain exceptions to ensure fairness and justice.