Initially, there are two components which form the basis of a contract. They are,

  • An Agreement
  • Its enforceability by law


An agreement consists of proposal or an offer by one party and its acceptance by another party. It also implies that the parties have a common intention about the subject-matter of the agreement. Two parties must be thinking the same thing in the same sense. Thus agreement is the outcome of the two consenting minds, i.e.,"consensus ad idem".

According to Section 2(e) of the Indian Contract Act, 1872

Agreement is defined as "every promise or every set of promises forming the consideration for each other".

According to Section 2(b) of the Indian Contract Act, 1872

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.

Enforceability of Agreement by law: 

Agreements based on its enforceability by law are of two types-
  1. Unenforceable agreement
  2. Enforceable agreement
All agreements to become a contract must be enforceable by law. Enforceability by law in contracts refers to the ability of a contract to be legally binding and upheld in a court of law. When parties enter into a contract, they typically have certain rights and obligations outlined in the agreement. Enforceability ensures that if one party fails to fulfill their obligations or breaches the contract, the other party can seek legal remedies to enforce the terms of the agreement.

“All contracts are agreements but all agreements are not contracts.”


According to Section 10 of the Indian Contract Act, 1872

     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.

In order to become a valid contract, an agreement must consist of the following essential elements,
  • Offer and Acceptance
  • Lawful Consideration
  • Capacity of the partners
  • Free Consent
  • Lawful object
  • Agreements Not Expressly Declared Void
  • Possibility Of Performance