What is a Contract?

Contract is a type of agreement where there is an exchange of legally enforceable promises between parties. To create a legally-binding contract, there must be 6 essential elements:

1.There must be an offer where one party is willing to enter into an agreement with another party.

2.There must be an acceptance where one party signifies their willingness to enter into a contract with the party making the offer. An offer can be accepted by words or actions.

3.There must be consideration given by each party. Consideration is a right, interest, profit or benefit experienced by one party with some detriment, forbearance, loss or responsibility experienced by another party. An example of consideration between parties is one party paying money and the other party providing a service.

4.Parties to a contract must intend for the agreement to become binding when it is accepted by the other party.

5.Generally, only parties who are privy to (named in) a contract can sue or be sued on the contract. Third party rights are usually not recognized except in specific circumstances.

6.There must be certainty of terms between the parties to the contract. Each party must know what the terms of the contract are.

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