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Understanding Contracts
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UNDERSTANDING CONTRACTS
Introduction
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WHAT IS A CONTRACT?
AN AGREEMENT
AGREEMENT
Harmony or accordance in opinion or feeling. A negotiated and typically legally biding arrangement between parties as to a course of action.
CONTRACT
The writing which contains the agreement of parties, with the terms and conditions, and which serves as a proof of the obligation.
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Essential Terms of a Contract
- A contract should be in writing.
Essential Terms of a Contract
- At a minimum, contracts should identify: Who, What, When, Where, and How Much.
Essential Terms of a Contract
- You should have enough information for a Court, Arbitrator, or Third Party to be able to enforce the contract.
Elements of a Contract
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FREE CONSENT
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Free consent is one of the essential elements of valid contract. Parties to a contract may agree upon the same thing in the same sense, and along with the same. Consent must be free from any pressure. Lack of free consent would render the contract voidable at the option of the party not a default.
COMPETENCY
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The parties must be competent to contract.
Every person is competent to contract if they meet:
- The age of majority
- Who is sound mind; and
- Who is not disqualified from contracting by law.
CONSIDERATION
(How Much?)
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Money or something of value exchanged between the parties (including a promise to do or not to do a certain thing).
Lawful Object
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Legally enforceable terms and conditions, also called object of the contract. It is necessary that the purpose of the contract should be legal. It must not be fraudulent or illegal or immoral or opposed to public policy.