What Makes a Contract Legally Enforceable in Nepal? 2026 Guide

What makes a contract enforceable in Nepal?

A contract is generally enforceable when legally capable parties reach a sufficiently certain agreement to do or not do a lawful act, communicate proposal and acceptance, give genuine consent, act through proper authority and complete any writing, registration or other formality required by law.

The National Civil Code, 2074 distinguishes a valid contract from a void contract, a voidable contract and a contract that exists but cannot be enforced through court because a required formality or authority is missing.

Agreement and acceptance

Section 504 provides that an agreement enforceable by law between two or more persons to do or not do an act is a contract. Acceptance of the proposal creates the contract and binding legal relations.

Drafts, negotiations and term sheets do not always prove final acceptance. Record the final version, acceptance method, date and conditions clearly, especially where parties negotiate by email or execute counterparts.

Certainty of essential terms

The parties should be able to identify the subject, obligations and essential commercial terms. Section 517 treats an agreement as void where the subject cannot be ascertained or performed, was impossible from the outset, is imaginary or is too vague to receive a reasonable meaning.

Use definitions, specifications, milestones, price formulas and objective standards. An agreement to agree later may leave the most important obligation unresolved.

Legal capacity

Each party must be legally capable of contracting. Verify age and legal capacity for individuals and legal existence and permitted activity for organisations.

For companies and institutions, capacity and internal approval are separate from the representative's signature authority. Review constitutional documents, board decisions and delegation.

Lawful object and purpose

Section 517 treats contracts contrary to law, involving prohibited or illegal acts, immoral purpose, public order or public interest as void. The section also addresses certain restraints and denial of access to legal rights.