Contracts 101: What makes a contract legally binding?

We all do contracts and agreements in our day-to-day life. Sometimes official and sometimes unofficial. Unofficial agreements and contracts are non-professional types of contracts. But, people who do businesses, run startups, and are involved in any other sector perform official contracts.

Contract is a way through which 2 parties show involvement in some specific work with each other for example:- Basic trade agreements, Merger and acquisitions, employee contracts and others. They’re also required to govern everything from business transactions to personal agreements. Whether you're joining a company or purchasing something from a business or for your business too you do contract.

This discussion is dedicated to informing you about the contract. If you’re a newbie and didn't acquire any kind of legal knowledge then this blog is for you. It is one of our objectives to deliver exceptional knowledge regarding contracts and its legality.

What is a contract?

The contract refers to a legally enforceable agreement between 2 or more parties that creates obligations which all the parties involved in the contract must fulfill. This can be written, oral or implied by conduct. Out of all the types of contracts, written contracts are considered the most authenticated and best way for clarity and proof.

The main objective of having a contract is establishing a legally enforceable agreement between 2 parties that creates the obligations which all the parties must fulfil. It is also recognized as an act of legally binding attaining certain conditions and regulations.

These conditions ensure that the parties who are involved understand and accept the terms of the condition of the contract. It is a legal document which can be presented as proof that someone cheated or breached the contract.

Essential elements of a contract

Talking about the elements of the contract, we have found the major elements which you should know about contracts. These key elements make the contract legally acceptable and make it a proof of agreement between 2 parties.

• Offer:- The first and foremost element of contract is offer. We have explained the importance of offers which act as an origin of a contract. One party proposes an agreement to another outlining specific terms in it. Let's say, a businessman had made a contract with a builder to build a complex for him under specific conditions.
• Acceptance:- Once the offer is made, the other party has the choice whether to accept the contract or reject it. If the other party thinks that he/she can complete the contract then they accept the contract. Acceptance of the contract can be made in several ways: in writing, verbally, or by performing the agreed action. Let's say the builder understands all the terms and conditions of the contract, and he can fulfill them; then the builder accepts the contract of the complex offered by the businessman.
• Consideration:- Consideration is also a crucial part of every contract. Consideration is a legal term which means something of value exchanged between the parties involved in the contract. In most of the cases, parties offer money, services, goods and others. We can say that consideration is the reason for bringing the 2 parties together. Without a dedicated consideration, a contract is not legally enforceable.
• Mutual intent:- Both the parties who are involved in any contract must have a mutual intent. They must agree on the terms and intent of the agreement. The significance of mutual intent is present in the form of signature on the contract paper. The signing of both parties works as proof that both parties understand the terms of the contract and agree to continue with it.
• Sound mind:- Both the parties who are involved in any contract must have to be sound mind. Any contract with an unsound mind personality is void. Along with this, any contract with minors (persons below 18 years) is also not considered valid, and minors are not liable for any kind of loss or breach of contract. Both parties must be capable of being involved in any contract. Then, only the contract is considered valid.
• Legality:- A contract of weapon assignment of smugglers is not considered a legal contract. So, the contract must be legal and not involved in any kind of legal activities.

These are the key elements of the contract which we have described to make you self aware about your legal terms that helps to maintain a healthy contract. Otherwise, legal programs are also seen as highly beneficial to keep aware about these essential elements of contracts.

Common mistakes people make when

signing contracts

At the time of making a contract, people generally make lots of mistakes that raise questions about the authenticity of the legality of the contract. Here, we have mentioned some of the most common mistakes which you have to avoid while getting engaged into a contract.

• Not reading the entire contract: It is one of the most common mistakes which people make at the time of signing the contract. You should read each and every condition of the contract properly before signing the contract.
• Overlooking Clauses:- It is important to know how and when your contract is terminated but most people do not consider the clauses and suffer loss in future time.
• Giving weightage to oral agreements: People give weightage to oral agreements and don't think about making a legal contract. As a result, they get stuck in fraud and suffer heavy losses. 
• Ignoring ambiguous terms:- ambiguous terms in the contract are a root that confuses the line. Many people make this mistake at the time of signing the contract and suffer loss.

These are the common mistakes which people make while signing a contract. But, this can be eliminated by hiring a corporate lawyer for your contract who examines every term of the contract.

Final words

Contracts are a crucial part of human life and work to authenticate the agreement done between 2 parties in a legal manner. You just need to be mindful of common mistakes and complete a legal course for contracts that will help you to sign a legal contract on your terms and make you aware of the terminologies of the contract which you’re going to sign.

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