Valid and Legally Binding Contract

Valid and Binding Contract: 

      A contract is a legally enforceable agreement. In any particular form a simple contract is one which does not needs any agreement. The contracts may be oral, it may be writing, or it may possibly depend on the accomplishments of the parties. Mostly simple contracts all are completely oral (by word of mouth). Some of the examples of the simple contacts in everyday transactions are buying a bus, purchasing a newspaper, buying a book or CD, purchasing a sandwich, and going to movie. 


                         In this the parties must be in agreement. By means of occurrence of an offer both the parties are resolute whether they are in agreement with each other. That means in an agreement with the presence of an offer one party can accepts the other party’s agreement. 


                         For any valid contract Consideration is the key element. A determinant to the promisee or to the promisor consideration is the main benefit. Financial consideration is not necessary for a valid or binding contract. 

Capacity to Contract:

                             Capacity means that each party must have intangible capacity to enter in to contract signing. Therefore it means that adequate legal competency is required by the parties.     


                             Frequently illegality can invalidate a contract. Some of the agreements are considered as completely illegal that means which commits a murder- those are not treated as valid contracts.                      

                      In order to make the valid contract agreement, consideration, capacity and legality are the four main elements. The contract is treated as illegal and void if any of the key elements of the valid contract is violated. In order to avoid the misunderstandings and disputes between the parties both the parties are familiar with each other before signing any contract .  

Various types of Business Agreements: 

  • Employment Contracts
  • Buying and selling goods
  • Export or import of goods
  • Renting or buying a property
  • Franchise Agreement
  • Sub-contracting Agreement
  • Use of software licensing agreement

The importance of the key elements required for the formation of a valid contract : 

  • Important key elements are contained in the valid contract.
  • If the contract is considered as invalid if it does not contains any key elements.
  •  An invalid contact may be
    • Void
    • Voidable
    • Unenforceable
  • An organization is not recovered in case of invalid contract, for example property is transferred to the third party. Dealing with the invalid contract both the time and money are loosed to the parties.
  • So it is stated that for the formation of a valid contract key elements are essential. 

Assess the importance of the rules of intention and consideration of the parties to the agreement: 

Intention to create legal relations:

  • In a commercial agreement there are legal relations which are acknowledged by the court.
  • When people are entered into the commercial agreement, this agreement recognizes that people are intention to enter into the legal relations.
  • This rule of law is known as “rebuttable presumptions”.
  • For the future plans legal relations are not supported as well as liability should produce the burden of proof.  

Importance of rules of consideration: 

Consideration is the price of the other person’s promise.

Promise means it can be profit, benefit, or interest.

Price means responsibilities given, suffer, or forbearance (tolerance), loss

Privity of Contract:  If the person has should not provide the correct consideration, he can’t take the legal action on the contract.      

 Additional Rules:

  • From the promisee considerations are passed.
  • Sufficient and necessarily adequate considerations are passed from the promisee
  • Performance of the promisee should be legal
  • Performance must be possible 

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