A contract is a promise that is a legally enforceable agreement between two or more parties. Most contracts are in written form. This is intended to lessen the likelihood of disputes and to heighten the understanding between the parties. To be legally binding contracts must consist of certain elements.
A Meeting of the Minds
To create a legal contract an offer must be made by one party and accepted in its entirety by the other. In other words, both parties must agree on the exact terms without one party offering something that is then amended by the accepting party. Frequently, there is a period of negotiation before a contract is drafted during which the parties hammer out the details so that a clear offer is made and accepted in the contract’s final written form.
All parties to a contract must intend to be legally bound. This means that the contract can be enforced in a court of law should one party fail in its duty to another. A court may not have the power to intervene if the contract includes a clause that refers to the parties not wanting to have the document reviewed or enforced by a judge.
All contracts must include some form of consideration. That is, one party promises something to the other party in exchange for something from that party. Consideration may be money, goods or services. It may also be a promise to forbear from doing something. In many contracts, one party promises to provide goods to the purchasing party. A complex and highly detailed statement of the terms of the agreement can make up a substantial portion of the contract. The terms may deal with how much of the product will be provided, the schedule of delivery, the manner in which delivery will be made and other related items. Terms may also be included that dictate the purchaser’s price per item and whether or not a discount is available depending upon the ordering of bulk items. Regardless of the specific terms, a legal contract must include consideration from and for all parties.
All contracts must be properly signed and dated to be binding. Moreover, each party must have the appropriate mental capacity and be of legal age to sign. They must enter into the agreement willingly, and the contract must fulfill a legal purpose in order to be binding.