What is a contract?


A contract is a legally binding or valid agreement between two parties. A contract is valid and enforceable if the agreement contains sufficient evidence of the following elements:

1 an offer and an acceptance;

2 a common intention between the parties to create binding relations;

3 the giving of “consideration” for the promise made;

4 legal capacity of the parties to act;

5 genuine consent of the parties; and

6 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 below.

Must contracts be in writing?

No. Not all contracts need to be in writing. In some cases, statute law requires contracts to be in writing (e.g. contracts to buy and sell land, or to buy a 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 (e.g. copies of quotations). However, a quotation is not a contract. Copies of invoices for the actual work done and 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.