A contract is a promise between two parties (who can be people, organisations or companies). However, it is different to a normal promise because it is legally binding.
WHAT DOES ‘LEGALLY BINDING’ MEAN?
It means that the law will enforce the contract (it will make sure that both sides keep their promise in the contract). For example, if someone does not keep their promise under the contract then a court could make them keep it, or they could make them pay money to the other person instead of keeping their promise.
WHAT CAN A CONTRACT BE FOR?
Contracts are everywhere in every day life and they can be very simple or very complicated.
Examples of the type of thing that a contract can be for are:
- To buy things – like food, land or clothes.
- To provide a service – for example, to build a house for someone.
- Agreements within companies about how they will run.
However, you cannot enter into a contract for anything that is illegal.
HOW DO I ENTER INTO A CONTRACT?
A contract can be written or spoken, but it is much better that a contract is clearly written down.
Otherwise, it can be very difficult to enforce because it can be difficult to prove what was agreed. There must be four main things to make a contract:
- A very clear offer to enter into the contract.
- Very clear acceptance of the offer.
- Consideration. This means that there must be a benefit to both parties from the contract. This is often money but can be anything else that the law sees as valuable, except for feelings. If all that one person gets in return for giving something to another person is a good feeling, then it is a gift and not a contract.
- You must intend to create a contract because you want to be able to use the law to enforce it. For example, it might be difficult to enforce a contract that it between members of family or friends.
IS THERE ANYTHING THAT CAN MAKE A CONTRACT NOT BE VALID?
Sometimes the law says that a contract is not a valid contract in order to protect people from having to do things that they do not want to. Situations where a contract may not be enforceable are, for example:
- If you were forced into making the contract.
- If you entered into the contract on the basis of being told something that is not true.
- If the contract is made by a person who is under 18 or by someone is who does not have the
mental ability to understand the importance of the promise in the contract.