Legal Binding Contract Definition

A legal binding contract is a formal agreement between two parties that creates an obligation to do (or not do) something. The contract can be written, verbal, or implied by the actions of the parties. A contract is legally binding when all of the following elements are present: offer, acceptance, consideration, and mutual intention to be bound. Contracts can be executed in writing, orally, or through conduct.

When two parties have a disagreement, they can often resolve the issue without going to court by entering into a settlement agreement. A settlement agreement is a legally binding contract in which both parties agree to resolve their dispute in a certain way. The agreement may specify how much money one party will pay the other, or it may outline what steps each party will take in order to resolve the issue.