Understanding Contract Law: Everything You Need to Know
Contract law is a field of study within the legal profession that is involved with regulation, establishment and legislation as it pertains to contracts.3 min read
Contract law is a field of study within the legal profession that is involved with regulation, establishment and legislation as it pertains to contracts. Within that scope, a contract is a document that is legally binding, provided that the activities spelled out therein are lawful. Learn more about different types of contracts.
Most contracts are entered into by a minimum of two people (or parties) and contain four points, the most significant being:
- One party is making an offer that the other party accepts. This can also be called a meeting of the minds or a concurrence of wills.
What Are the Key Requirements to a Contract?
Legally, a contract can contain almost anything, provided that all of it is legal. However, to ensure the validity of a contract, there are certain key points that must be included to ensure that it is not later deemed null and void. Among them, are:
- Mutual assent, which is essentially the valid offer and acceptance.
- Capacity to Contract, which is the verification that all parties are of sound mind and body (and of legal age), and are therefore mentally and emotionally able to enter into a legal contract.
- Consideration, which exists to ensure that a contract is in some way, beneficial to all parties involved.
- Lawfulness of purpose, which ensures that any and all activities as spelled out in the contract are legal.
- Legality of form.
- Intention to create legal relations, meaning that all parties are in agreement as to the terms of the contract and the legality thereof.
- Consent to contract, meaning that all parties are entering into the contract willingly and without being coerced. Additionally, it means that all parties were clear-headed and not under the influence of drugs, alcohol or other mind-altering substances.
Perhaps you have questions as to the legality of a contract that you have signed. Within the scope of contract law, a contract may be deemed illegal for a few different reasons:
- A minor (someone under 18) has entered into the contract
- One of the parties entered into the contract under threat, blackmail or another form of coercion
- There are illegal activities cited in the contract, such as homicide, drug dealing, or (in some jurisdictions) gambling
- One of the parties was under the influence of drugs or alcohol, and therefore unable to legally consent
- One of the parties is not, for whatever reason, considered medically capable of entering into a legal contract, due to mental or emotional reasons
To ensure that any contract you are becoming engaged in is fully on the up-and-up, it can be beneficial to consult with an attorney prior to signing.
Contract vs. Agreement
As there are some similarities between a contract and an agreement, the terms are sometimes used interchangeably, however, this is not necessarily accurate. In fact, contract law definitions make it quite clear that the two are not actually one in the same. Some of the key differences include:
- An agreement is not legally binding as a contract is. Therefore, should one of the parties involved in the agreement not honor their end of the deal, the other party does not really have any legal recourse.
- Legal action can be taken in the case of a breach of contract, which results from one of the parties involved in the contract not meeting their obligations.
The Formalities of a Contract
Generally speaking, we often think of contracts as being written documents, however, legally they can be entered into verbally, as well. With that said, it is far easier to enforce a contract, should it be necessary, if it is a written document. The reasons being fairly obvious: it is easier to prove that all parties were in agreement as to the terms of the contract when it is there in black and white, and signed by everyone involved.
However, the verbal contract is still considered just as valid and legally binding as a written contract; these types of contracts are also referred to as, “a contract implied by the acts of the parties”. For example, if you hire a website designer to create a website for you and they begin doing work on it (submitting you design ideas and copy language), then their actions imply that a contract has been entered into.
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