Introduction to Contract Law

Contract law governs most agreements between parties, whether oral or written, that involve goods, services, money, employment contracts, and real estate deals. There are four basic elements to create a legally binding contract: offer, acceptance, consideration, and intention to create legal relations.

An offer is distinguished from an “invitation to treat,” which is an invitation for someone to make an offer that the first party can accept. An acceptance is an agreement to the terms of an offer, and it must be communicated to the offeror. An offer can be terminated in several ways, including being withdrawn before acceptance, lapsing after a set time, or being rejected.

An agreement may be incomplete, and the parties may not have agreed to some essential details, although it may be complete even if it is not worked out in meticulous detail. Generally, if the parties agree "subject to contract" but never agree on the terms of the contract, there will be no contract. Some agreements are not enforceable contracts because there is no intention by one of the parties to create legal relations.

Consideration is something of benefit to the person who has the obligation or who makes a promise to do something (called the promisor) or something that is a detriment to the promisee (the person who wants to enforce the obligation or who has the benefit of the promise). As long as some value is given for the promise, the courts will not consider whether "adequate" value is given. The consideration must be provided by the party who wants to enforce an obligation in the contract (or, possibly, by someone else as his agent) but need not be provided to, or benefit, the promisor.

Where there is a promise to do something but lacks consideration, it must be made in a deed. A deed is a document under seal which either transfers an interest, right, or property, creates an obligation that is binding on someone, or confirms an act which transferred an interest, right or property. Not all documents under seal are deeds.

Contract law governs most agreements between parties, whether oral or written, that involve goods, services, money, employment contracts, and real estate deals. There are four basic elements to create a legally binding contract: offer, acceptance, consideration, and intention to create legal relations.

An offer is distinguished from an “invitation to treat,” which is an invitation for someone to make an offer that the first party can accept. An acceptance is an agreement to the terms of an offer, and it must be communicated to the offeror. An offer can be terminated in several ways, including being withdrawn before acceptance, lapsing after a set time, or being rejected.

An agreement may be incomplete, and the parties may not have agreed to some essential details, although it may be complete even if it is not worked out in meticulous detail. Generally, if the parties agree "subject to contract" but never agree on the terms of the contract, there will be no contract. Some agreements are not enforceable contracts because there is no intention by one of the parties to create legal relations.

Consideration is something of benefit to the person who has the obligation or who makes a promise to do something (called the promisor) or something that is a detriment to the promisee (the person who wants to enforce the obligation or who has the benefit of the promise). As long as some value is given for the promise, the courts will not consider whether "adequate" value is given. The consideration must be provided by the party who wants to enforce an obligation in the contract (or, possibly, by someone else as his agent) but need not be provided to, or benefit, the promisor.

Where there is a promise to do something but lacks consideration, it must be made in a deed. A deed is a document under seal which either transfers an interest, right, or property, creates an obligation that is binding on someone, or confirms an act which transferred an interest, right or property. Not all documents under seal are deeds.

Some jurisdictions impose requirements for contracts to be in writing or in a particular form. These include contracts for the sale or other disposition of an interest in land, some consumer credit agreements, and some requirements relating to employees. The courts apply an objective test in deciding if the parties have reached agreement.

It is safer to make it clear if no enforceable contract is to be created. Contracts can be oral, partly oral and partly written or written, and can be made informally. In conclusion, understanding the basic elements of contract law can help individuals make informed decisions when entering into contractual agreements.

How to use this document? 

Here is a step-by-step guide on how to use this document:

1. Understand that contract law governs most agreements between parties, whether oral or written, that involve goods, services, money, employment contracts, and real estate deals. Contract law derives mainly from the common law.

2. Know that there are four basic elements to create a legally binding contract: offer, acceptance, consideration, and intention to create legal relations. The courts apply an objective test in deciding if the parties have reached agreement.

3. Understand that an offer is different from an invitation to treat. An offer can be accepted, while an invitation to treat is an invitation to someone to make an offer. An acceptance is agreement to the terms of an offer. Offers can be accepted by conduct.

4. Know that an offer can be terminated in various ways, including by withdrawing it before it is accepted, by a condition occurring if it said it was conditional on something not happening or by being rejected.

5. Understand that some agreements are not enforceable contracts because there is no intention by one of the parties to create legal relations. Generally, it is assumed that the parties do intend to create legal relations.

6. Know that consideration can be something of benefit to the person who has the obligation or who makes a promise to do something, or something which is a detriment to the promisee. The consideration must be provided by the party who wants to enforce an obligation in the contract, but need not be provided to, or benefit, the promisor.

7. Know that a deed is a document under seal which either transfers an interest, right or property or creates an obligation which is binding on someone or some persons or confirms an act which transferred an interest, right or property. Not all documents under seal are deeds.

Please note that this is just a general summary of position under common law and does not constitute legal advice. As each jurisdiction may be different, you may want to speak to your local lawyer. Remember that the courts may also consider additional factors when determining whether a contract is legally binding, and some agreements may not be enforceable even if they meet the basic requirements.