A contract is nothing but the legal binding between two or more
parties that enter into a legal agreement. The contract is valid if
there is an offer made, offer accepted and the consideration to be
paid by the promise made.
A valid contract has four requirements. They must consist of
offer, acceptance, consideration and intention of legal
consequences.
- Offer – It
is an act to do something or to pay an amount, if accepted, forms a
valid contract. To make an offer there should be at least two
parties or even more who can legally enter into a contract. It is
important to specify the deadline for the acceptance of offer in
order to avoid potential dispute between the parties or
cancellation. An offer cannot take silence as a form of acceptance
from the other party.
- Acceptance
– After the offer is made, there should be acceptance from the
other party or parties to make it a valid contract. The party
accept the offer if they are clear with the rules and regulation.
If the parties are still under the negotiation process and there is
no acceptance till now to the offer, then it is still not a
contract. If a person to whom the offer is made has accepted only
some of the terms or proposes some of the new terms, then it is the
counter-offer that is made by the other party and is still not a
valid contract.
- Consideration – This forms
the important part of the contract which consist of value such as
money, payment or the cost of the promises of performance agreed to
in a contract. A valid contract will have consideration part for
both the parties where one party promises to do something in return
for a promise from the other party to provide some benefit.
- Intention of legal
consequences – A contract is valid if the parties agree to
enter into a contract legally and are aware that the agreement can
be enforced by law. Sometimes the document may contain the words
“subject to contract” or “without prejudice” which indicates that
the things that are written are legal in nature.
An enforceable
contract is a contract which is valid by the court.
Any contract which is either made verbally or written must include
specific element in order to make it legally enforceable in a
court. If any of the elements is missing from the contract, then it
will not be enforceable.
Unenforceable
contracts are the contracts that are valid but the
court will not enforce it. If the parties do not perform the valid
contract, the court not compel them. These type of contracts will
have ambiguous terms if one party has a voidable contract or if
statute of limitation has expired or because of Doctrine of
Laches.