University of Chicago
Type of paper: Thesis/Dissertation Chapter
Essentials of Business Law
There are many types of contracts made between people, however there are several guidelines to follow for the contract to be valid. A contract is defined as an official agreement which can be written or an oral agreement. A contract is a promise that is made between two or more people and can be formal or informal. There are six elements that make the contract valid, if these elements aren’t present in the contract then it is not considered to be valid.
The first element of importance would be that the two parties must have an offer. An offer is the actual promise or agreement that needs to be decided upon because this is what makes the whole contract exist. In order to make a valid offer, there should be at least two people or more so that they can create a legal contract. Then the offer must be accepted by the other party/parties to be a legal valid contract. Both parties must fully be aware of what is being offered as well as what the other party must do in return. Once the offer is made in a contract, the other party must accept the offer. The contract cannot be official without the other party accepting the offer. The other party can accept the offer that is being made by writing or verbally.
The next important element in the contract is consideration. Consideration is when the other party gives something back in response to the offer being made. Consideration is anything of value that is given in exchange for goods or services, and is used to induce the other party to enter into a contractual agreement. This makes the contract similar to an exchange between the two parties. In order for a contract to be legally valid, there must be a consideration.
Although the Contracts Act 1950 does not state anything on the necessity of the intention to create legal relations, it is considered very important to have this element when making a valid legal contract. This element is an agreement that is not a contract unless it is in the common intention of the parties that it should be legally enforced. Such as an agreement made between two people about belongings that should be inherited after a person’s death.
Certainty is another important element in the contract, the guidelines and rules that are made in a contract must be clearly stated and understood by both parties involved in the contract. The agreement must be certain or the contract will no longer be valid.
Capacity in the contract is described as the parties in the contract having the legal capacity to carry out the contract. The parties must be at least of the age of 18 or older. Minors or people below the age of eighteen do not have the capacity to enter into a valid contract legally. All types of contracts are different, for example some are long and contain a lot of legal termination while others are written in simple English and are only a page long. Contracts are also used for many different reasons such as for large corporate businesses to personal matters. The many different type of contracts are created for many different purposes such as fix-price contracts, labor contracts, and time- material contracts to name a few. These contracts are created different but they are still required to meet all the expectations of a legal valid contract.
Rogers, S. (2012). Essentials of Business Law. San Diego, CA: Bridgepoint Education, Inc.