Contract Definition And Components

What is Contract?

A contract is basically an intended plan concerning two or more parties and which is enforceable by law as a legally binding agreement.

What are the components of a legal contract?

The contract is only considered to be valid and legal if it contains the six essential components. One of them is that, it should entail an offer and acceptance note. A contract is usually formed when one party makes an offer and the other party accepts the offer, in exchange of desired benefits. A good contract is one in which both parties benefit from the agreement to avoid chances of causing conflicts in future (Corey, 2015). The other component is the intention between the parties to form binding relations; these intentions are legally bound by the contract. This is followed by consideration, which is the promise of something that is valuable given by the promisor to the promised party in exchange of the desired benefits. The other one is that legal parties for the mentioned parties should have the legal capacity be to enforce contracts. For example, minors below the age of 18 years may not have the legal capacity to sign a contractual agreement. The next one entails the genuine consent of the parties, it is mandatory that all contracts are written down; some may be made orally or even by conduct, depending on the genuine consent of concerned parties. The final component is the legality of the agreement, a contact is deemed to be illegal if it promotes individuals to commit crimes, or the parties lack the capacities to enforce contracts.

What must parties agree before a contract can be entered into?

Before a contract is signed, concerned parties must consider and agree on several factors beforehand. The first one is that, they must agree on the agreement process. This entails the process of one side of the party offering the desired terms and conditions that guide the process, and the other party either accepts or rejects the conditions. The offers changes to a counter-offer if the party changes the terms and conditions being offered. When this happens, the parties negotiate on the most appropriate terms that will benefit both parties, and upon making proper decisions, the agreement can be signed. The must also agree on the desired obligations and conditions of the contract (Gilbert, 2012). They have to ensure that all parties know and accept their obligations, and what they have to do to ensure that the terms and conditions in the contract are fulfilled to the latter end. They must also agree on the performances of each party, how they are going to be evaluated and monitored to ensure that transparency is maintained. The other factor is payment terms, how they are going to finalize the payments and fulfillment of the promises pledged. Finally, they have to agree on the right mode of punishment in the event that one of the concerned parties decides to breach the signed contract, and what should happen if both parties fail to fulfill their deal in the agreement.

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