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How to write a valid contract
How to write a valid contract

Contracts are entered into on a regular basis in people's lives, as well as in the course of their jobs. This book will teach you how contracts are formed and what your responsibilities under them are.

What exactly is a contract?

The word "contract" comes from the Latin term for "agreement." A contract is a legally enforceable promise made between two or more people in order to fulfill an obligation in exchange for something of value. Contracts may be written, verbal, or a combination of both.

Contracts that must be in writing include the sale of property or a tenancy Agreement.

What are the advantages of entering into a contract?

The absence of a formal contract means that your rights are not secured by law, and neither party is held to its obligations. If one party fails to live up to the contract (known as "remedies"), there will be various reactions available for the parties (known as "remedies").

It's usually better to have a formal contract in place. If the parties disagree on the terms of the contract or if those terms are ambiguous, it will be up to a court to interpret them. The court will then analyze how the services, promises, and exchanges were implemented in order to determine the parties' intentions.

The following are the most important elements of a contract:

A contract must fulfill four criteria to be valid: agreement, capacity, value, and intention. To guarantee that your contracts are always safeguarded, keep these elements in mind.

Agreement

Offer

When an offer is made by one party (for example, a job offer) to the other, and that offer is accepted, a contract has been reached. An offer is a statement of conditions to which the individual making the proposal is prepared to be legally bound. An offer is not the same as an "invitation to treat," which merely invites someone to make a deal and isn't meant to be legally binding. Ads, catalogues, and brochures that contain the pricing of a product are not offers; instead, they're invitations to treat. If they were, the advertiser would have to send out all of those who "accepted" them with the goods before being able to sell more.

Acceptance

The offer must be unconditionally accepted (for example, a signature on a contract of employment) and it must be delivered. Any discussions between the parties are counter-offers rather than acceptance.

Acceptance is not generally seen as acceptance unless it is obvious that acceptance was intended, such as by way of conduct (such as paying for a service). The definition of adequate acceptance will differ based on the type of contract.

Capacity

The contract must be easily readable by everyone involved, and all parties must have a basic understanding of what the terms entail. The contract should be freely given consent to. This implies no coercion/force, fraud, undue influence, or misrepresentation may be used during the process.

The following are examples of situations in which you may not be able to create contracts:

  • children under 18 - If the agreement is for necessities (food and clothing) or education (an apprenticeship or employment contract), it will not be considered.
  • those who are suffering from mental illness or under the influence of drugs or alcohol- If you are unable to understand the nature of a transaction due to an impairment, or if the other party is aware of your incapacity, this might be grounds for rescission.

If a person with capacity has entered into a contract, it is generally up to them to decide whether or not they want to invalidate the agreement.

Consideration

A contract is not binding unless the parties exchange value. This is referred to as consideration. Consideration does not have to be appropriate or beneficial to the other person; it simply has to exist (for example, if someone offers to sell their home for free, there is no consideration; but if they offer to sell it for £1, there is valid consideration).

The following are some examples of insufficient consideration:

  • an existing public duty (e.g a police officer's responsibility to protect the public) or contractual duty (e.g The provision of services that are already required by another contract)
  • anything with sentimental value only
  • the previous action was before the contract began - Consideration must now shift from the contract (eg A present received in January can't be used to calculate the length of a contract signed in October.)
  • anything illegal

Intention

Not all agreements between individuals are valid contracts. It must be apparent that the parties intend to enter into a legally enforceable agreement.

In the case of commercial agreements, most people assume that both parties wanted to enter into a formal agreement.

There is rarely a desire for agreements to become legally firm contracts in social situations (for example, friends agreeing to meet at a specific time would not be enforceable).

It is up to the person who wants the agreement to be a contract to show that the parties truly intended to enter into a legally enforceable contract.

Ending a contract

You may terminate a contract for any of the following reasons (e.g because the agreement has been violated). Read Ending a contract for more information.

Those who are unable to enter into a contract

The law presumes that certain persons cannot enter contracts. Those who fall into one of these categories are:

  • children under the age of 7 
  • people who lack mental capacity 
  • people who are under the influence of drugs or alcohol

A minor between the ages of seven and eighteen can enter into a contract. It is assumed that a minor in this case does not comprehend the consequences of doing so. The minor is entitled to receive the same protections as he or she would have if the contract were never concluded. In other words, the minor's rights are preserved at the expense of the other party. The minor may cancel a contract before reaching age 18 and for a reasonable period afterward without cause as the agreement is "voidable."

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