A contract can be defined as:
An agreement or promise between, two or more persons which is legally binding and enforceable in a court of law.
Essentials elements of a valid contract
1. Offer and Acceptance
There must be a valid offer which is lawful and a valid acceptance of such offer which will result in an agreement.
Once an offer is accepted it forms a promise which can be enforced at law.
2. Intention to create legal relation
There must be an intention the parties to create a binding legal relationship. This means that social and domestic agreements do not constitute a contract.
3. Consensus ad idem
This is the unity of mind and purpose with regards to the subject matter and terms of the contract. When the parties enter the agreement, each must clearly understand the other’s terms regarding the contract.
It is only that which is said or done the parties which constitute this element and not their inner thoughts.
It is the price for which the promise of the offer is bought.
It is something in return for something (quid proquo). It must always exist; otherwise the contract will be void.
5. Contractual capacity
Parties to a contract must have legal capacity. They should not possess any legal disability e.g. minority, insanity, bankruptcy etc.
The parties to the contract must therefore be adults of sound mind.
6. Free consent
The parties should have entered the contract freely and free from any external forces.
Their consent must therefore be willful and based on the individuals best judgment.
7. Legality of the object
The objective or purpose for which the parties are contracting should not be illegal, immoral or opposed to public policy. Otherwise the contract will be void e.g. contact to commit crime.
8. Possibility of performance
Whatever the parties intend to do in a contract must be possible legally and physically otherwise the contract will not be enforceable law.
9. Legal formalities
All the required legal formalities for establishing the contract must be fully performed.
However, this will depend on the nature of the contract e.g. some contacts may be oral while others in writing.
Classification of contracts
Express and Implied Contracts
These are contracts which the parties specifically agree about the nature and terms of the contract and their relationship in the contract is clearly defined