The barter system is a method of exchange where goods and services are directly traded without the use of money. In this system, individuals or communities exchange their surplus goods or services for other goods or services they need. While the barter system can be traced back to ancient times, it is still practiced in some parts of the world today.

1. Absence of Money:
The key condition for the barter system is the absence of a commonly accepted medium of exchange, such as money. Without money, people rely on the direct exchange of goods and services to meet their needs.

2. Mutual Need:
For a barter exchange to take place, there must be a mutual need or desire between the parties involved. Each party should have something the other party wants or requires. This mutual need motivates the exchange and facilitates the transaction.

3. Determining the Value:
In a barter system, the value of goods or services being exchanged must be agreed upon by both parties. This can be challenging as the value of different goods or services may vary based on their scarcity, utility, or demand. Negotiation and bargaining play a crucial role in determining the value and ensuring a fair exchange.

4. Division of Goods:
Barter exchanges often involve the division of goods into smaller units for exchange. For example, if someone wants to trade a cow for wheat, the cow may be exchanged for a certain quantity of wheat rather than the entire stock. This division allows for more flexible exchanges and accommodates the needs of both parties.

5. Lack of Double Coincidence of Wants:
One of the limitations of the barter system is the requirement of a double coincidence of wants. It means that for an exchange to occur, both parties must simultaneously desire what the other has to offer. This can be a significant challenge as it may be difficult to find someone who wants exactly what you have and has what you want.

6. Difficulty in Storing Wealth:
Another condition of the barter system is the difficulty in storing wealth. Since goods and services are directly exchanged, it may not be easy to store the value of surplus goods for future use. This can lead to challenges in saving and accumulating wealth.

In conclusion, the barter system requires the absence of money, a mutual need between parties, determination of value, division of goods, overcoming the double coincidence of wants, and dealing with the difficulty of storing wealth. Despite its limitations, the barter system served as a crucial method of exchange in the past and still has relevance in certain situations today.