A contract is a legally binding or valid agreement between two parties. The law will consider a contract to be valid if the agreement contains all of the following elements:
- offer and acceptance;
- an intention between the parties to create binding relations;
- consideration to be paid for the promise made;
- legal capacity of the parties to act;
- genuine consent of the parties; and
- legality of the agreement.
An agreement that lacks one or more of the elements listed above is not a valid contract.
Each of these elements is dealt with in more detail in this section.
Not all contracts need to be in writing. Contracts that are required by law to be in writing include contracts to buy and sell land or to buy a motor car and door-to-door sales contracts. However, it is always useful to have the terms agreed between the parties written down and attached to or kept with any other relevant papers; for example, copies of quotations, brochures, pamphlets, etc. that were supplied at the time the contract was entered into. Receipts for money paid should always be kept. If a dispute arises, these documents will assist in resolving differences between the parties.
A written contract can be drawn up by listing all the terms agreed between the parties and getting each of the parties to sign and date the document at the end.