Legal Definition of a Contract
A contract can be defined as an agreement between two or more parties. Legally speaking, a contract is a voluntary agreement between two or more parties, that creates a duty on each of them to do or refrain from doing something, which is the subject matter of the contract; and a right to performance of the other's duty, in case of breach of that duty.
Contracts can be written or oral. While it is mandatory for some types of contracts, like sale of real property, to be written; others can be oral or written. However, written agreements with signatures of the concerned parties are always preferred, especially, in case of crucial contracts that involve hefty amounts. This enhances the legal enforceability of the contract, as there is evidence for the terms and conditions that are agreed upon by the parties.
What are the Basic Elements of a Contract?
So, a contract must have certain basic elements, so that it is legally binding on parties, and enforceable before a court of law. The following are some of the basic elements of a contract.
- According to contract law, competency of parties to a contract is very important. In general, people above the age of 18 are considered competent for entering a contract.
- Another basic element is the voluntary mutual agreement to form the contract. The decision made by each party must be voluntary and not forceful or coercive. In other words, there must be a meeting of minds between the parties to a contract.
- One of the basic elements of a contract is the definite offer from one party, and the acceptance of the offer by the other party. Without an offer and acceptance, a mutual consent is not possible.
- Consideration is another important factor of a contract. It can be defined as the profit of gain of one party or the loss or the disadvantage or cost incurred by the other, through the implementation of the contract. A consideration can be monetary (in terms of money) or some other benefit.
- Another basic element of a contract is the legality of the subject matter of the contract. In other words, a contract cannot be made on an activity that is illegal in that region.