A contract is a promise or an agreement between two or more persons or organizations to do or to refrain from doing a particular thing in exchange for something of value. The Breach of this Agreement, promise or contract is recognized by law and provision for remedies of such breach exists in law. The contract can be written in formal or informal words or it can be even oral depending on the nature and subject matter of the contract.
The Terms of the Contract – who, what, where, when, and how of the agreement – define the binding promises of each party to the contract.
A contract normally is completed in there steps- the first being the offer of the contract, which means offering some one to do something in exchange of money or anything of value. The second step is other party’s acceptance of the contract, i.e. undersigning of the agreement by the other party/parties after understanding of each terms and acceptance. The last and final step is the performance of the contract that is to deliver the actual product/service in exchange of something of value.
Words, gestures, or actions can signal an offer to enter into a contract and an acceptance. If you are forced to make an offer (“your money or life”) it is not a valid offer. Similarly if you are tricked into accepting, it will not be deemed acceptance of the terms offered. To have a binding obligation on both sides, both sides must approve and accept the terms and conditions of the offer. Offers remain open until: (1) accepted, (2) rejected, (3) retracted prior to acceptance, (4) countered, or (5) expired by their own terms.
In case of rejection of an offer a new contract can be put on the table (called a “counter-offer”). A counter-offer is a new set of terms and conditions given in response to the original offer. A counter offer may vary from the original offer in just one word, clause or multiple provision of the entire contract.
You can take back or change the contract before the other party has agreed and undersigned the contract. This is termed as retraction. On the other hand, changing your mind after you have signed or agreed precludes retraction. Absent compelling reasons for not holding up to your end of the bargain, you will be a party to a contract.
The there different types of Acceptance of Contract recognized by the Court of Law are:
The law clearly defines the key elements of a binding contract and those key elements are:
Competent Parties – For a valid contract, each party must have the capacity to enter into it. Capacity may be seen in terms of legal capacity, mental capacity, age, etc. Agreeing to perform an illegal or illicit act is not consideration and the contract is void. A drugged or mentally impaired person does not hold the capacity to enter into any contract.
Minors (e.g., usually those under eighteen) cannot, generally, enter into a binding contract without parental consent, unless it is for the necessities of life, such as food, clothing, or for student loan contracts.
Consideration – A contract is always based on mutual exchange. One must give something of value in exchange to the other party in agreement with you. The value or the compensation is mostly expressed in terms of money, however it can be anything even property.
Mutual Assent – Both the parties must be clear in all the clauses of the agreement and there should not be any element of doubt before signing the contract. Meeting of the minds sometimes can be expressed by words spoken or gestures made or can be inferred from the surrounding circumstances. There is no mutual assent: (1) one side is obviously joking or bragging, (2) there is no actual agreement (i.e., the farmer who is selling a gelding and the buyer thinks the horse is a brood mare), or (3) both sides have made a material mistake as to the terms or details of the contract.
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