A contract is an agreement between two or more persons (individuals, businesses, organizations, or government agencies) to do or to refrain (stop) from doing, a particular thing in exchange for something of value (money, time or services etc.). The parties commit to certain obligations in return for certain rights.
An agreement between two or more persons that will be enforced by law may be:
Partly in writing and partly oral
A contract is a legally enforceable agreement between parties which is binding in law. The parties commit to certain obligations (things they must do) in return for certain rights (things they are entitled to). For a contract to be formed, it must be a bargain with at least two persons. A contract cannot be made by one person alone.
The Main Principles (rules) for a legally binding contract are:
• Formation of contract – Agreement (offer, acceptance)
• Intention to Create Legal Relations
• Consideration (exchange of value, quid pro quo, something for something)
• Capacity(mental and physical ability to enter the contract)
• Contents (terms, exclusions)
• Vitiating factors (misrepresentation, mistake, duress, illegality, etc.)
• Discharge “End” (performance agreement, breach, frustration);
Every day we enter contracts, most of those contracts are subconsciously entered into and we are rarely aware of the intrinsic nature of a contract and all of the essential elements which must be fulfilled in order to have a legally binding and enforceable contract, we simply take the law of contract for granted.
Simply buying a bottle of water or your morning coffee affords the same legal principles as buying a car or entering into a million euro business deal. Contracts do not need to be in writing to be enforceable, on the contrary, if you were to have a written contract every time you went to the shop for a paper or to buy a coffee there would be some very long queue’s as you would have to write the terms of the contract down and sign it, time-consuming and frivolous as very little, actually selling would be done due to the time which it would take per person to put all of the essential elements of a contract in writing. There are some contracts that require a written and signed deed (written document or agreement) mainly the sale and purchase of land, property, commercial property and loans.
If you are buying or selling something, of course, you can request that this sale or purchase be written down, you can set your own rules and as long as they are not breaching any legal rules or legislation and the other persons signs, then you can pretty much set out whatever rules you want, however, for most sales or purchases, this is a formality and not a requirement for the contract to be binding on both parties.
Agreements create obligations. Therefore, any agreement that is enforceable in a court of law is a contract and no person should be bound unless they have given their informed and true consent to the contract.
This basic introductory booklet is just that, a layman’s guide, it is not meant to be an academic textbook, it is merely a guide, however, saying that many first-year law students on the CPA, ATI and ACCA courses as well as year one legal proactive and LLB students find it invaluable as it introduces all the rules and principles in plain English and they can then get on with the important task of learning the terminology once they come to grasps with the principles. There is a self-test MCQ at the end of the book AND answers.
This guide is designed to explain ideas and concepts rather than to give legal definitions, including some of the following;
Formation of a Contract
Distinction between Offer and Invitation to Treat
Termination of an offer
Intention to Create Legal Relations (intention to be legally bound)
Family, Domestic or Social
Executed and executory consideration
Rules of Consideration
Doctrine of privity of contract
Contents of a Contract
Term or representation
Matter of Fact
Officious Bystander Test
Matter of Law.
Terms implied bythe Courts.
Implied by Custom..
The Parol EvidenceRule.