What is a Contract?

I recall very vividly, a scene from a 1970's comedy where the hapless hero of the piece, accidently gets engaged to a young lady and spends the whole program ploting hilarious ways to escape from this engagement. At the conclusion of the vignette the chap breaks off the engagement, receives a sound slap from the disturb lady and is promptly told that she will sue him for break of promise.

During the 1970's, for those not old enough to remember, getting engaged was a very serious business as an engagement was deemed to be a legal contract and one could indeed be sued for a failure to carry an engagement to its logical end. The legality of this form of contract was ever rescinded, but what exactly constitutes a contract?

Firstly let us define a contract. A contract is an agreement between two or more parties which is enforceable by law.

This does not really help us much, as all contracts are agreements but not all agreements are contracts. Let's look at an example … if two people agree to meet at a pub at seven O'clock this does not determine a contract … so there must be some other criteria in place to form a contract … for a contract to be valid, three questions have to be asked.

1. Has a contract been formed? For a contract to be in place and legally binding these elements need to be satisfied.

o Offer and acceptance. One of the parties must have made an offer which is accepted without qualification by the other party. An example would be where Geoff offers to sell his yacht to Mark for £ 5,000 and Mark accepts this verbal offer … providing other criteria are satisfied, a contract would be deemed to exist.

o An intention to create legal relations. There must always have been the intent behind the agreement that if a dispute anose, the agreement should be subject to a court of law.

o Purchase or exchange of assets. In its simplest terms there must be a debit and credit element for both parties; for instance in the sale of a yacht, the seller will suffer the 'loss' of his yacht but gain a benefit of £ 5,000 … conversely the buyer will suffer the 'loss' of £ 5,000 but receive the benefit of the ownership of a yacht.

o Capacity. Each party must be legally able to enter into the contract, for example, minors and people of 'unsound mind' are limited in their powers to enter into contracts.

o Format. In some instances, a contract must have a specific format eg some contracts must be in written form.

2. Is the agreement recognizable and enforceable by law? Some contracts will become invalid because of factors such as mistakes or undue influence. Examples might be errors on an invoice that is marked 'E & OE' or the example of a 'shotgun wedding'.
3. When are the obligations of the parties terminated and what remedies are there for breach of contract?

So there we have the all the criteria required of a contract. The actual drawing up of a business contract, as you might expect, would almost certainly require the services of a solicitor, but imagine that a contract was with an overseas party. In that case the services of a specialist legal translation agency would certainly be required in order to avoid any errors or omissions that might invalidate it.

Source by Jack Waley-Cohen

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