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A contract refers to a legally binding agreement between two or more people or parties such as organizations. A contract may be written or oral. When two or more parties enter into a contract, a contractual relationship is created between them. A contractual relationship is usually characterized by provision of an offer, acceptance of the offer and validity of the offer. The parties usually enter into a contract voluntarily. However, after entering into a contract, the parties become legally bound and obliged.

According to Treitel (2011), each party that enters into a contract usually acquires certain rights and duties or responsibilities in relation to the contract. For example, one party will have the right to receive goods and services from another party who is obliged to deliver the goods or services. Moreover, both parties involved in a contract often expect certain benefits from the contract. For a contract to be legally binding, it must have four major elements. These elements include offer, acceptance, legal consequences and consideration (Carter, 2012; Chadman, 2011).

Offer. An offer refers to a simple statement that indicates that one party is ready and willing to enter into a contractual relationship with another party based on certain terms. A contractual offer must be presented in an expressive manner that is capable of acceptance without further explanation and shall not contain any other hidden requirements. The party presenting the offer must also be ready and willing to bind him or herself with the contract. It is important to note that a contractual offer is different from an invitation to treat. For an offer to be accepted, it must be clear and understandable. Moreover, the offer must not have any conditions attached to it.

Acceptance. An acceptance is an indication that the party represented with the offer is willing and ready to enter into contractual relationship with the party presenting the offer. An acceptance of a contractual offer is binding only if it occurs before the expiry of the offer. Bok and Micallef (2009) assert that an offer can only be accepted exactly as it has been offered without any conditions. This implies that when new terms and conditions are suggested, then the offer may be rejected or considered a counter offer. The acceptance of an offer may be done through writing, verbal communication or inference by action that indicates acceptance of the offer.

Legal Consequences. In a contract, the parties are legally bound by the agreement. This implies that the parties entering into a contract must create legal relationships between them. Legal binding also makes the contract enforceable by laws. For examples, if one party fails to fulfill the promises made in the contract, the grieved party may seek legal relief from the law.

Consideration. A contract becomes legally binding only if it is supported by valuable consideration. Monahan and Carr-Gregg (2007) define a consideration as a benefit or advantage that one party gets from another party in the contract. Contractual consideration means that one party makes a pledge to do something in exchange for a promise from the other party to provide a benefit of value. In most cases, contractual considerations often take the form of payment in monetary form, although other forms of considerations are also acceptable. Both parties entering into a contract must determine whether the consideration is adequate or not. Contractual laws often require that the consideration must be something of value such as money and it must be given in exchange for the offer.

Conclusion

In summary, as long as the four elements of a contract discussed above exist, the parties may enter into a valid and binding contract. In case any of the above elements does not exist, then the contact will not be legally binding, thus considered void. Moreover, the parties entering into a contract must also be competent and of sound mind. Any party entering into the contract must also do so in free consent. All contracts create legal relationships and must be enforceable by law. It is also worth noting the people who lack legal capacity to enter into contracts cannot be bound by a contract even if it has all the four elements. Such people include minors, persons with mental impairment and bankrupts.

Code: Sample20

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