Section 10 of the Indian Contract Act, 1872: What agreements are contracts

The provision

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.

Indian Contract Act, 1872, Section 10. Official text.

What Makes an Agreement a Contract Under Indian Law

Section 10 of the Indian Contract Act establishes the foundational test for whether any agreement qualifies as a binding contract. It sets out four essential conditions that must all be satisfied: the parties must freely consent, they must be legally competent to contract, there must be lawful consideration (something of value exchanged), and the object or purpose must be lawful. If all four elements exist and the agreement is not otherwise declared void by law, it becomes an enforceable contract.

The Four Core Requirements in Practice

Free Consent means all parties genuinely agreed without duress, coercion, fraud, or undue influence. Courts examine the circumstances of formation to verify true agreement existed. Competence requires each party has legal capacity: they must be of age (18+), sound mind, not disqualified by law (such as being a foreigner under certain restrictions, or a bankrupt in specific contexts), and not acting in a representative capacity without authority. Lawful Consideration means something valuable moves between parties (money, goods, services, or a promise), and this exchange must be legal. Lawful Object means the contract's purpose and performance cannot violate law, public policy, or morality. An agreement to commit a crime, evade taxes, or cause harm fails this test.

Importantly, Section 10 also incorporates a safeguard: if any agreement is expressly declared void elsewhere in the Act or by other law, it cannot become a contract regardless of meeting these four conditions.

Drafting and Contract Implications

When drafting contracts governed by Indian law, ensure your agreement explicitly demonstrates all four elements. On consent: include clear signature blocks, date the document, and document any negotiations to show free agreement. Avoid ambiguous language that could suggest duress or undue influence. On competence: obtain representations and warranties from each party confirming their legal capacity, age, and authority to enter the contract. For corporate parties, require proof of board resolution and signatory authority. For individuals, consider requesting identity proof. On consideration: always specify what each party gives and receives, even if nominal (recitals should articulate the exchange). Courts have struck down contracts where consideration was unclear or absent. On lawful object: explicitly state the contract's purpose is lawful, and avoid clauses that might indirectly facilitate illegal acts (such as unenforceable indemnities for criminal conduct or tax evasion). Be alert to provisions that violate public policy or statutory restrictions (eg. non-competes that are unreasonably broad, or clauses that circumvent mandatory labour protections). During negotiation, challenge any clause suggesting duress or unequal bargaining power, as courts may find lack of free consent and void the agreement. Document your negotiation process, counteroffers, and final consensus to establish genuine mutual assent.

This page explains the law in general terms for information only. It is not legal advice. Always read the provision in its official source and take advice on your specific facts.