Law For Business



Law For Business

Q1. What is a contract?

It is an agreement between two or more people based on detailed terms where there is a consideration involved. This consideration is a promise in return for a valuable benefit. The laws that involve in contracts are of different kinds depending on the circumstances and complexities involved. Contract is an official agreement which can be in the form of written or oral. They can be written either using a formal or informal terms and can be verbal or spoken. This is like a promise between two or more parties and such legal agreement helps the courts to make judgments. The essential elements of a contract for it to be valid depend on offer, acceptance, consideration, intention for creation of legal certainty. These elements if not present in a contract will make the contract invalid.

Essential elements of a valid contract

The contract that meets all the legal requirements become valid and enforceable which means that both the parties involved can hold other person accountable in case of a breach of contract. The contract is valid if three requirements are met.

Offer and Acceptance

The contract is valid when there is a mutual consent between both the parties and is evidenced by an offer and acceptance. The offer is made by an offeror and it shows that a person is willing to enter into a contractual agreement. The offeree is the person to whom the contract is made. Thus, when the offeror and the offeree accept the terms and conditions a contract is formed. There can be a mention of a time limit for the acceptance to take place or it can be left open to be used at a later stage. For instance, let's take an example of an online advertisement which is not considered as an offer, but an invitation for negotiation. In case when an offer states a particular time for acceptance but fails to indicate than the court may allow acceptance even after the time it expires. However, if time is of essence is stated in the offer than the acceptance must occur within the period specified otherwise there is a chance that the offer might get cancelled. In a situation where the offer fails to specify what form of acceptance is acceptable like whether it will be letter format, telephone call or any other, than there is a good chance the offer can be accepted in any form. The acceptance will not take place until the offeror knows about it and usually is accepted through a signed copy of the offer to the offeror.

Binding & Enforceable nature of contracts

The rights and obligations of both the parties involved in the contract usually depend on the contractual agreement with mutual acceptability which is subjected to laws. The courts weigh the adequacy of the consideration to be sufficient to meet the test of law. For instance, in a case where the car is agreed to be sold in $1 becomes a binding contract if ...