What is a Contract

A contract is a legally binding agreement between two or more parties that defines and governs the rights and duties of those parties to an agreement. Contracts are foundational for ensuring that all involved parties adhere to agreed terms. They can be oral or written, but certain types of contracts must be written to be legally enforceable, such as those involving real estate transactions, agreements lasting more than one year, or large financial commitments.

The purpose of a contract is to establish the conditions of the agreement clearly, allocate risks and responsibilities, and provide a mechanism for resolving disputes. Contracts are used in various settings, from business dealings to personal agreements.

Key Points About Contracts

• Formation: A contract is formed when there is an offer by one party, acceptance by another party, and mutual consent to the terms, which may include considerations or payments exchanged between parties.
• Enforceability: For a contract to be enforceable, it must meet specific legal criteria, including clarity of terms, capacity of the parties to contract, and lawful purpose. It must also be free from duress and undue influence.
• Types of Contracts: Several types of contracts are based on how they are executed and enforced. These include express contracts, where the terms are explicitly stated, and implied contracts, where the terms are inferred from the parties’ actions.
• Breach of Contract: If one party fails to fulfill any agreement terms without a lawful excuse, it is considered a breach. This can lead to legal penalties, including damages or, in some instances, the forceful performance of the agreement.