Following are the essential requirements of a Contract as per Indian Contract Act 1872.

a) Two Parties : For the formation of a contract there must be two parties i.e. promisor and promisee. The who makes the proposal is called the promisor and the person to whom the proposal is made called the promisee.

b) An Agreement : According to Indian Contract Act section 2(e), every promise and every set of promises, forming the consideration for each other is an agreement.  And when at the desire of the promisor, the promisee or any other person has done or abstained from doing something, such act or abstinence or promise is called consideration for the promise under section2(e) of Indian Contract Act. An agreement implies an offer and its acceptance. When an offer is accepted it becomes an agreement.

It is not necessary that every agreement must give rise to legal obligation. If an agreement does not create any legal obligation, there cannot be any contract. Agreements which are not binding on the parties do not constitute a contract. Thus all agreements are not contracts.

c) Legal Obligation : For the formation of any Contract, an agreement should give rise to a legal obligation and the obligation must be enforceable by law. Here an obligation means the legal duty to do or abstain from doing something. The agreement which give rise to only social, religious or domestic obligations cannot be termed as contracts. Promises such as taking a lunch, going for a walk are not contracts as they do not create any duty or obligation enforceable by law. Thus all agreements are not contracts and all obligations also do not constitute contracts.