Contract Formation as Agreement and Legal Duty
A contract is a legal agreement between two or more people. It is not just an agreement; it also comes with legal responsibility for both parties and it has two main parts:
Agreement: This happens when one person makes an offer, and the other person accepts it. Both people must understand and agree to the same terms.
Legal Obligation: For the agreement to become a contract, it must be something the law can enforce. This means that if one person does not keep their promise, the other person can take legal action.
The essential steps in the formation of a contract are as follows:
1. Offer: One person makes an offer to another person. The offer must be clear and specific. For example, a seller offers to sell something for a certain price, and the buyer understands the terms.
2. Acceptance: The other person must accept the offer exactly as it is, without changing any details. For example, the buyer agrees to the price and terms set by the seller.
3. Consideration: Both people must give something of value. This could be money, goods, or services. For example, the buyer gives money, and the seller gives the product.
4. Mutual Assent: Both people must mutually intend to make a legal agreement. They must agree that the contract is serious and that the law will hold them responsible. For example, a promise between friends is not usually a legal contract.
5. Capacity: Both people must be old enough (usually 18 or older) and mentally able to understand what they are agreeing to. If someone is too young or doesn’t understand, the contract might not be valid.
6. Legality: The contract must be for something legal. If the contract involves something illegal, like selling drugs, it is not valid.
Hence, a contract is valid when both people agree to the same terms, exchange something of value, and understand that the law will hold them to their promises. The agreement must also be legal, and both people must be able to make the contract.