AuthorFeng, Judy

Introduction to Contracts

Contracts are in every aspect of our everyday lives. When you rent a home, you have to abide by the terms of a lease. If you have a mortgage on your home, you essentially have a contract with your bank to pay back the money they lent you. When you go to work, the terms and conditions of your employment are likely outlined in a written employment contract. You are under a contract whenever you use your mobile phone or queue up your favorite show on your television subscription service. By the end of today, you will probably enter into some more contracts. Did you buy a coffee in the morning or grab some groceries? Work out at a gym? How about open up your web browser to read the news? Have you done some online shopping? All of these activities are governed by contracts.

What is a contract?

A contract is a type of agreement where there is an exchange of legally enforceable promises between parties. To create a legally-binding contract, there must be 6 essential elements:

  1. There must be an offer where one party is willing to enter into an agreement with another party.

  2. There must be an acceptance where one party signifies their willingness to enter into a contract with the party making the offer. An offer can be accepted by words or actions.

  3. There must be consideration given by each party. Consideration is a right, interest, profit or benefit experienced by one party with some detriment, forbearance, loss or responsibility experienced by another party. An example of consideration between parties is one party paying money and the other party providing a service.

  4. Parties to a contract must intend for the agreement to become binding when it is accepted by the other party.

  5. Generally, only parties who are privy to (named in) a contract can sue or be sued on the contract. Third party rights are usually not recognized except in specific circumstances.

  6. There must be certainty of terms between the parties to the contract. Each party must know what the terms of the contract are.

For each of these elements, there are additional rules that have been developed in case law. While we won't be going into further details about the elements of a contract in this article, what you should know is that the elements of a contract often overlap. For example, the rules of certainty of terms and the rules of offer and acceptance overlap.

What does a contract look like?

A contract is often in the form of a written agreement between...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT