Monday, January 24, 2011

the essential elements of a valid contract

Contract is the foundation or base of all commercial transactions. A contract is a bargain, a deal from which both parties expect to benefit. In world of business, in which is built upon agreement making and to know that it will be carried out or that some remedy will be obtained instead. Distinguishing those agreement which are contract is essential and legally enforce from those which are not.
The word ‘contract’ may be defined as ‘an agreement enforceable by the law’. Example, a contract is an agreement which is legally binding between parties. As in Malaysia Contract Act 1950, clause 2 (a),(b),(c),..(j), the interpretation of the following words and expression are used in the following senses;
  1. When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal;
  2. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: a proposal, when accepted, becomes a promise;
  3. The person making the proposal is called the "promisor" and the person accepting the proposal is called the "promisee";
  4. When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or prom­ise is called a consideration for the promise;
  5. Every promise and every set of promises, forming the consideration for each other, is an agreement;
  6. Promises which form the consideration or part of the consideration for each other are called reciprocal prom­ises;
  7. An agreement not enforceable by law is said to be void;
  8. An agreement enforceable by law is a contract;
  9. An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract; and
  10. A contract which ceases to be enforceable by law be­comes void when it ceases to be enforceable.
In many cases, it is important to determine whether or not there is a contract, and if so, when it was formed and what terms it contains. In principle, a contract comes into existence when the following requirements are met:
  1. The parties have reached an agreement
  2. The parties intend their agreement to be legally enforceable.
Essentials Elements of a Valid Contract
All contracts are agreement, but not all agreement is contract. In order for an agreement to become a contract, there are 8 elements to be fulfilled:
1. Proposal(offer) and acceptance
2. Consideration – lawful consideration with a lawful object
3. Intention to create legal relations
4. Certainty
5. Legal relationship
6. Free consent
7. Legality of the objects
8. Required formalities. 


  1. can you explains more on the "required formalities" in Contract Act 1950 please;)ty


    A contract can be made either:



    Both orally and in writing,

    Sometimes, certain law would require that the agreement be made in writing. If this is the provision, therefore the agreement has to be in writing so that it would be a valid contract.


    Example would be under the Hire-Purchase Act 1967 which requires the purchase agreement to be in writing, If it is not in writing the agreement shall not be enforceable by the owner of the good.

  3. hey thanks for the info :) due date is tomorrow :(

  4. Discussion on contract involving THREE of the factors under S.14 of the Contracts Act 1950 (of your choice): as far as im concerned its about element of contract that can cause to be voidable
    s14 free consent (coercion, fraud bla bla bla)
    but i dont understand the next question
    which is :
    Recommendation for amendment of Malaysian law related to the above contracts ????

  5. what is the example of reciprocal promises?

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