A contract is a voluntary agreement between two parties that states certain obligations will be fulfilled as agreed upon by the parties.
The four parts a contract must have:
- Intention to create a legal relation between the parties
One party makes an offer such as work to be fulfilled or a flat to be rented, and the other party accepts the terms set forth in the contract.
A gratuitous bargain is not considered binding by the court. Some consideration, something of value, must be offered. However, the courts do not determine the fair price of a transaction. If a person chooses to sell a car below market value that is their choice.
A contract can be made orally between two parties. However, if there is a breach of contract by one party it will be difficult to uphold the contract in a court of law.
Contracts that include a guaranty of payment should be put in writing and signed by both parties. If the contract is with a business, the signer must be the owner or an authorized representative of the company. An employee’s signature will not usually be considered an authorized signature.
For contracts that involve a large transaction, such as the sale of piece of property, witnesses are also required. In some instances, each party must bring something of value – known as compensation – to make the contract binding.
In general, most contracts work without the involvement of the court system – when each party withholds their end of the bargain.
If the contract is not fulfilled as agreed it is considered a “breach of contract” and the parties can seek legal recourse.
The courts prefer that the injured party give written notice to the breaching party of their intent to seek legal remedy. Mediation is encouraged to settle the matters so going to court is not necessary.
If mediation is not successful then court proceedings may be required to settle the issue. Small claims court is an option of the damages are not a large amount.
Damages may be awarded by the court if one party suffered due to the obligations of the contract not being fulfilled.
Compensation is usually in the form of monetary damages, the amount of loss one party suffered due to the breach of contract by the other party.
The damaged party must show that they fulfilled their side of the contract. When the court feels that one party was not truthful when setting forth the terms of the contract in the beginning, the court may say the contract is void and not enforceable.
The courts will not uphold a contract that was entered into by someone who was under duress or mentally incapable at the time. Minors cannot enter into a contract on their own.
Contract law is a complicated subject with many aspects to consider. If problems occur it is best to seek legal counsel. When creating a contract that deals with a high monetary transaction, it is often good to seek in the help of a solicitor to avoid problems in the future.