A contract is a legally binding agreement between parties. It creates mutual obligations that, if they are unfulfilled, grant the other party the right to seek redress in court.
Not all agreements are legally binding. For an agreement to constitute a legally binding contract, several components must be present. These include offer and acceptance, consideration, mutuality, and capacity.
A legally binding contract must have an offer and acceptance. One party must offer a product or service to another who accepts it. Consideration is the other essential component. This is something of value that one party gives to another in exchange for the provision of a product or service. Without the exchange of adequate consideration (for example, when a service is rendered for free), there is no legally binding contract.
Mutuality refers to a meeting of minds. Basically, the parties to the contract must intend to bind themselves to the agreement. In addition to intention, they must have the capacity to contract. That means they must be adults by law, capable of entering into binding agreements. Furthermore, they must be of sound mind. If they are representing a company, they must have the legal authority to contract on its behalf.
Legality is another essential factor to making a legally binding contract. The court will not enforce a contract that involves carrying out a crime or doing an illegal act.
