What is a contract?

Date: Aug 08, 2014
Document Type: Article

Most people think of contracts as mountains of paperwork and fine print. But chances are you enter into numerous contracts every day without even realising it. Every time you buy goods, get a ticket for a car park, engage a plumber or agree to a website’s terms and conditions you have entered into a contract.

So what exactly is a contract?

A contract is a promise or a set of promises that the law regards as binding. It is usually between two parties although more can be involved.

To create a contract there needs to be settled agreement between the contracting parties which is accompanied by some type of value (known as ‘consideration’). For example, any time you order from a cafe you are contracting with that establishment to provide you with certain food. They promise to give you that food so long as you pay them (the consideration).

This doesn’t mean you need to call a lawyer every time you agree to something. Not every promise you make will be a contract. To make a contract, there also needs to be an intention between the parties to create legal relations. So there’s no chance your daughter can sue you because you promised to buy her a pony if she did her homework.

Generally, anyone can enter into a contract once they reach 18 years of age. However, minors can be bound by contracts in certain circumstances. It comes down to the type of contract and degree of understanding required by the person to enter it. So whilst a 15 year old would have no problem entering a contract to buy a movie ticket, they probably won’t have the level of maturity required to borrow money from a bank. This question of understanding may also affect people with mental illness or intellectual disabilities.

Contracts don’t necessarily have to be in writing. A contract can be made orally as long as you fulfil the above requirements. However, if you are making promises about something substantial, it’s always safer to have it in writing. That way, it’s easier to tell what you agreed to if there’s a dispute. For this reason, some contracts such as agreements to buy land are required by legislation to be in writing.

If you require assistance drafting or understanding a contract, please do not hesitate to get in contact with Craddock Murray Neumann Lawyers today.

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