A contract is an arrangement that is written or laid out by one party and is signed by another party when they agree to the terms and conditions. In the concept of free contract, all of the parties that are involved in it are allowed to decide on what type of agreement they want to be part of.
A contract is legally binding when it enforceable by the law. An example of a legally binding contract is an employment contract. This contract and all other contracts should include all of the essential elements of a contract to be considered effective and at the same time useful.
What Are the Parts of a Contract?
Enumerated below are the parts that make up a contract and other sample contracts.
- The parties – The names of all the parties involved in the contract should be written in it so that they will be bound to the contract.
- Terms and clauses – This is the part where the contents of the contract are separately explained in detail.
- The Agreement – This is where a general statement of the service or product that has been agreed upon is written.
- Date – Refers to the date and time that the contract will be signed.
- Signatures – The signatures of all the parties involved should be part of the contract that will serve as proof that the particular party agreed to the terms and conditions stated in it.
What Are the Requirements for a Contract?
- Consideration – Refers to giving something of value or that is important in exchange for something else.
- Specifics – The details of the contract should be specific and should provide the exact outline of the contract being dealt with.
- Legal – Legal terms are necessary to make a contract legally binding and enforceable by the law.
- Capacity – All parties involved should be capable of being part of an agreement.
- Written instrument – Refers to the contract document that is signed by all parties, just like a contract template or a house rent contract.
Essential Elements of a Valid Contract in Business Law
- A contract must be voluntary and should not be forced to another part or person.
- A contract must be legal and it should be enforceable by the law. It should be kept free from all kind of fraud.
- It should be offered and never forced.
- Oral contracts are also considered legal and enforceable by the law even if they are not written in a document.
- The contract should be freely accepted by the party or person who wishes to be involved in it.
- All of the parties in the contract should have a sound mental state and proper authority.
- Before a contract is signed, its importance and other elements are taken into consideration before a decision is made.
What Are the Advantages of a Contract?
- A contract provides a written document that can be used as a proof that the parties agreed to a certain agreement.
- Provides a clear outline of the duties and responsibilities of the parties involved.
- A legal contract binds and obliges the parties to follow the stipulated terms and conditions.
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