Basic Agreement Contract Definition
In a business context, a contract is an agreement between two or more parties to exchange goods, services, money, or anything of value. The term ‘contract’ is derived from the Latin word ‘contrahere,’ which means ‘to draw together.’
A contract can be either written or oral, but it is typically in writing because it provides evidence of the agreement. A contract typically includes the following elements:
-An offer: One party makes an offer to another party.
-Acceptance: The offeree accepts the terms of the offer.
-Consideration: Each party must exchange something of value (such as money, goods, or services) as part of the agreement. This is known as ‘consideration.’
-Mutuality of obligation: Both parties must be obligated to perform under the terms of the contract.
-Competence and capacity: Both parties must have the legal ability (competence) to enter into a contract and must be of sound mind (capacity) at the time the contract is entered into.
-Legality: The contract must not violate any laws.