What is a contract?
Contracts are part of everyday life. They affect every person in a different way. They may arise from a great variety of situations from employment contracts to contracts relating to buying and selling goods.
Contracts do not necessarily have to be in written format, they may arise in different ways.
Contracts are legally enforceable agreements between the people who make the contract. They are form through a process of offer and acceptance.
In order for a contract to be legally enforceable the law requires the following:
Agreement + Consideration + intention to create legal relations
The Agreement element of a legally enforceable contract
Basically the agreement requirement of a contract comes on the form offer and acceptance. The one party of the contract makes an offer to the other party, for example, offers the sale of a gold ring for £150. Providing the other party agrees with this he will then accept the offer and the agreement of the contract has been established.
What is meant by consideration?
The consideration of a contract is basically the bargaining element of a contract. So for example if a person is to buy a bar of chocolate the one party’s consideration would be the chocolate bare and the other party’s consideration would be the money to pay for the chocolate bar. Both parties therefore provide a benefit in some way to the other person.
Where a contract is not performed immediately, then the promise to do something or provide some sort of consideration can itself, be enough to create a legally binding contract.
For more information on:
- The meaning of intention to create legal relations
- What is the difference between a bilateral and unilateral contract?