Contract Law Introduction
Contracts cover all aspects of life. They are essential for commercial activities. They create a system of trust, enabling people to make agreements with each other with the protection of the legal system if anything goes wrong.
Due to the importance of contractual agreements and their use in everyday life, it is important for everyone to have a basic understanding of the rules governing them.
What Is A Contract?
A contract is a ‘promise’ between two or more people to do or not do something.
In legal terms, a promise is an undertaking that something shall happen (or shall not happen), in the future.
Contract Definition: A contract is ‘a binding agreement between two or more persons or parties especially: one legally enforceable’ . https://www.merriam-webster.com
The important point here is that a valid contract is ‘legally binding’.
Legally binding means that the people (parties) involved in the contract must follow through with the actions they have agreed to. If one party does not complete their part of the agreement then the legal system may force them to. This means that a valid contract is legally enforceable. If the terms of a contract are breached (not followed through) the person is said to be in ‘breach of contract’ and may have to pay compensation for any losses caused to the other party (person in the contractual agreement).
Contracting parties are the people who have knowingly and willingly entered into a legally binding promise (A valid contract) .
Types Of Contract
A contract may be in writing or oral. If a contract is for a large amount of money or for real estate, it is often required to be in writing for it to be legally enforceable. This is because it is often very difficult to enforce oral contracts.
An explicit contract contains clear details of the actions in the agreement. E. g. I will to pay you £2000 this Tuesday at 5pm for your car and we will complete the registration documents then.
An inferred contract may not include all the details as many may be obvious from the agreement being made. E.g. At a restaurant, you agree to pay £5.00 for a plate of fish and chips. It is clear (inferred) that the fish and chips will be cooked.
Requirements Of A Legally Binding Contract
There are many different types of contracts covering different areas and subjects. The main elements required to make up a legally enforceable contract are:
An Offer – I will give you $20 if you clean my car
Acceptance of the offer – The other person accepts the $20 and agrees to clean your car
Intent – The parties intended (meant to) create a legally binding agreement
Capacity – The parties involved in the agreement have the legal right or ability to make the agreement
Consent – The parties voluntarily agree to the contract (they are not forced against their will)
Consideration – this is the exchange of something of value between the two parties. ($20 – clean car)
Legality – The subject of the contract is legal
Performance – The act is completed as agreed $20 is paid out and the car is clean.
If an agreement does not have one or more of these elements, it will not be a valid contract and not be enforceable in a court of law.