Contract and Its Element
Contract and Its Element
AGREEMENT:
In the dynamic world we live in, interacting and communicating with other entities is the basis of our daily living. Whether we talk about a business or a person, interactions and transactions are a part of daily life. People perform these functions in both social and business settings. A large number of business or social transactions occur once the involved parties decide to enter into an agreement.
An agreement by definition is an oral, written, expressed or implied exchange of promises. This means that when one or both parties want to interact on the basis of mutual benefit, one party offers a proposal, the other party accepts the proposal and an agreement is formed.
Agreements are the very basic level of a developed understanding on which actions are required. Agreements can be formed between two persons, a person and a business, or between two businesses.
CONTRACT:
In a business setting, agreements are required to be formalized and modified to reflect certain requirements. A contract is formed when it contains all the basic elements of an agreement and is enforceable by law. Contracts therefore are considered to be a very vital part of business transactions that occur throughout the world.
Another important aspect of a contract is called “Consideration”. Consideration states that when two parties enter into a contract, it is understood that they will both be receiving something of value. A situation where one party offers a good or service for free cannot be considered a contract because both parties involved do not receive consideration in this situation.
ESSENTIAL ELEMENTS OF A VALID CONTRACT:
When one of the parties is unable to perform on its end of the promises after entering into a contract, the contract can be considered infringed or breached. In a situation as such, the other effected party of the contract may chose to seek a legal remedy, which can be ordered by a court in the form of direction, injunction, judgment or damages. However, before a court can take any such action, it has to determine whether the contract that is in question actually valid.
In order for a contract to be valid and be considerable for action in the court of law, it has to contain certain elements. These elements will discussed in further detail during the course of this report and are listed as follows:
Intention to enter into a legal contract
Lawfulness of objective (Lawful Object)
Proper offer and its acceptance
Free consent of parties
Capacity of parties to enter into contract
Legal formalities and writing
Certainty of terms
Possibility of performance
Not expressly declared void
INTENTION OF ENTERING INTO A LEGAL CONTRACT:
Before any contract can be formed or considered enforceable, the parties have to come to an understanding of the fact that they are entering into a legally binding agreement that is enforceable by law. For this to happen, the primary element that needs to exist is the intention of all the parties involved to enter into the contract.
If one or more parties a the very beginning does not have an intention of entering into a legally binding contract, that contract cannot be established and is hence considered invalid. By law it is required that before a contract can be established, a specific mention about it being a legally binding contract has to be present. If this is done, then parties entering into the contract are beforehand informed of the characteristics of the contract will only enter into the contract if they actually intend to do so.
Another important distinction worth mentioning is that social agreements cannot be automatically considered legally binding contracts. This is due to the fact that in a social setting, an the parties involved cannot be considered to be in a legal relationship by default. For example, a person who does not show up for lunch after agreeing cannot be forced to legal ramification.
LAWFUL OBJECT:
Another key aspect that courts consider while determining the validity of a contract is whether the acts that the contract comprises of are actually legal in nature. For instance, if a contract is formed between two parties to perform specific action on an illegal act, the contract itself is considered invalid. An example of such can be when two parties enter into an agreement