Definition of Contract
A Contract is an agreement between two or more parties which creates legal rights and obligations as between the parties involved.
Table of Contents
Parties to a Contract: This is the identity given to the persons who have made an agreement that is recognized by law as a valid contract
E.g. Landlord and Tenant
Insurer and Insured
Bank and Customer
Vendor and Vendee
Essential elements of a contract
A contract must satisfy certain basic requirements in order to be enforceable at law. These are:
- Offer and Acceptance
- Valuable Consideration
- Intention to create legal relationship €
- Legal capacity of the parties
- Genuine Assent
- Legal Object
Offer and Acceptance
An Offer is a definite statement by one party called the OFFEROR of the terms under which he will enter into contract with the party to whom it is made called the OFFEREE. An Acceptance occurs when the party to whom an offer is made agrees without attaching any conditions to the offeror’s proposal. Any attempt to accept the offer with modification is not an acceptance but a counter- offer which itself requires acceptance before a contract emerges. For an agreement to constitute a valid contract there must be an offer by one party and acceptance by another party.
Valuable consideration: Consideration is whatever is done or suffered or promised to be done or suffered by one party in return for the promise of the other party. To support a simple contract, consideration must be valuable. The most common example of valuable consideration is money or other property or a promise to pay money or transfer property.
Intention to create legal relationship
An agreement will not constitute a binding contract unless it is intended by the parties to it that should give rise to legal relations. An agreement to attend a dinner would not be a contract because it would neither be intended to create nor would it in fact create any legal obligations between the parties to it.
Legal capacity of the parties
The parties involved in a contract must possess legal capacity to contract. The following classes of persons are not capable in law of entering into a valid contract;
- Minors i.e. infants under eighteen years of age.
- Lunatics or insane persons
- Drunken persons or persons induced with drugs.
Genuine assent
For a contract to be valid in law, the agreement involved must have the mutual consent or assent of the parties. Where the consent of one of the party was obtained through fraud, deceit, misrepresentation or under undue influence, there is no valid contract.
Legal object
The purpose of the contract should not violate any law of the land. The
Courts will not enforce an illegal contract, even though all the elements required for formation of a valid contract are present.
In some cases such illegal contract involves a breach of criminal law. For example a contract between two or more persons to
- Commit murder or arson
- Defraud individuals or the government.
See also
GOVERNMENT REGULATION OF BUSINESS
FACTORS TO BE CONSIDERED IN CHOOSING AN ADVERTISING MEDIA