A contract is defined as an agreement which consists of an exchange of promises between two parties which is enforceable by law.
One question you should always ask yourself is, how does one determine whether an agreement has been reached which can become binding on the party and hence enforceable under the law.
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For an agreement to exist, there must be some essential components present;
Below are the essential components of a contract.
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- Offer And Acceptance
- Intention To Create Legal Relations
- Capacity To Contract
Now let’s take a look at the components in a detailed context.
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1. Offer And Acceptance
In every contract, there should be an offer and its respective acceptance.
An offer can be defined as an expression of a willingness to contact on specified terms without further negotiations.
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An offer must be accepted before a contract is made. The acceptance can come in the form of a word or in a written statement. It should also be in alignment with the actual terms that were offered.
2. Intention To Create Legal Relations
Under this component, the parties intend whatever exchanges they are having to be legally binding on them such that it creates legal relations between them.
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3. Capacity To Contract
Under this component, we are to enquire whether or not the parties have the capacity under law to enter into an agreement or execute a contract.
Certain categories of persons cannot execute a contract by law.
Khey include the following;
- An individual who is below the age of 18(a minor)
- A mentally challenged person
- A person under the influence of alcohol at the moment of contract.
This is the basis for which the parties may enter into a contract. It is the mutual exchange of promises. Though the consideration need not be adequate, it must be sufficient.
By law, a promise given without a consideration is not enforceable.