What is a contract

Contracts are documents that present the voluntary and deliberate, but legally binding agreement between two or more competent parties. Contracts can be written, spoken or implied. Generally it involves the sale, lease, or tenancy or employment.

Now, each party in a contract acquires rights as well as duties related to the obligations stipulated in the contract. While all parties may expect a fair benefit from a contract, it may not be to an equal extent, otherwise courts can set it aside as inequitable.

The existence of contractual-relationship would mean it is not enforceable, nonetheless not void or cancelled or even voidable, unless otherwise stipulated in the contract itself. Contracts are enforceable whether or not in written form. A written contract generally protects all parties to it.

Contracts for sale of real property, insurance policies, or installment plans, shall be enforceable and legally binding. There are also implied contracts which are enforced by law whether or not the parties have desire to enter into such a contract. These contracts are deemed protection contracts for service, products, etc.

What is a mere agreement?

Agreement is a negotiated but usually legally enforceable understanding between two or more legally competent parties for a potential undertaking.

A binding contract can and often result from an agreement, the latter typically documents the give-and-take of a negotiated settlement while a contract specifies the minimum acceptable standard of performance.

Explaining contract further:

A contract is actually an agreement, but with specific terms, between two or more persons or entities for a valuable consideration and has a promise to do something in return. The law of contracts is always at the heart of every business deal. It is a major area of legal concern that can involve variations on circumstances and provide complexities.

The contracts factual elements:

a) There is an offer
b) There is acceptance of that offer after meeting of minds;
c) There is promise to perform
d) There is valuable consideration
e) There is time or event that performance must be made to meet commitments
f) The terms and conditions for performance, including fulfilling promises.

Now, a unilateral contract is one in which there is a promise to pay in return for actual performance. Example, “I will pay $400 on Friday if you fix my window.”

A bilateral contract on the other hand is one promise to perform in exchanged for a promise of consideration. Expanding the example above; “I will pay $400 on Friday for you to fix my window and you promise to fix the window by Friday.”

Contracts can be in written or oral form, however, oral contracts are more difficult to prove and in most jurisdictions. Besides, the allotted time to sue on the contract is only two years for oral compared to four years for written contracts.

There are cases where a contract can consist of several documents, such as a series of orders, letters, counteroffers and offers.

Some types of contracts:

1. Conditional contract used for an event occurring
2. Joint and several contracts where several parties make a joint promise to perform and undertaking, usually used by General Contractors, but bearing same responsibilities.
3. Implied contracts are determine by courts, whereby due to circumstances presented, a binding contract may actually exist.

For assurance purposes, parties can enter in a contract to supply another party’s requirements, or purchase all the products made, with an option to renew a contract. The variations of promises in contracts are almost limitless.  However, contracts for illegal purposes are not enforceable by law.  Thank you for your interest on what is a contract.