A contract is an agreement between two or more parties to do, to not do or to promise something. Contracts can come in many forms — oral or written, implied or express and legally enforceable or not. The strongest contract, in terms of enforceability, includes an offer and an acceptance, has consideration for the exchange, clearly sets out the terms of the agreement without ambiguity and is signed by the involved parties who have the proper capacity to enter into the contract. Weaker contracts include verbal agreements or contracts that are drawn up by parties in direct violation of laws within that jurisdiction. There are many aspects related to valid contracts; in fact, an entire course in law school might be devoted to contract law.
People tend to think of written documents when the topic of contracts comes up, but the most common types of contracts are actually oral contracts. People pretty much enter into at least one oral contract every day. For example, a mother might tell her daughter that she will get a reward if she behaves properly at a certain event. If the child agrees to the deal, then it is a type of oral contract.
Implied or Express
Contracts and their terms can be implied, which means that the terms are understood without being specified, or express, which means that all of the details are included. Typically, when people think about contracts, they think of express contracts. For example, in a contract for a monetary loan, the person who is getting the loan usually must promise to pay a certain amount at regular intervals and at a certain interest rate until the loan is paid off. In addition, the terms of the loan might include fees for late payments. All of these terms are explicitly laid out in an express, written contract.
Sometimes, however, a term or the entire contract itself is implied. For example, when a customer orders food at a restaurant, he or she enters into an implied, oral contract. The customer and the server do not explicitly state the offer and acceptance for the meal and its prices, taxes and other conditions, but that agreement is implied.
Other Elements of Contracts
Offer and acceptances are fundamental parts of contracts. Without them, parties might be bound to contracts without their consent. Consideration ensures that something is being exchanged. In some cases, the law requires consideration to be adequate — that is, a relatively reasonable price — or nominal, if the price is irrelevant. Other times, the requirement of consideration might be waived in the interest of preventing injustice.
Contracts might or might not be enforceable by law. The example of the agreement between the mother and daughter would not be enforceable by law, whereas the agreement for a loan likely would be enforceable. Whether specific contracts are enforceable by law depends on numerous factors, including whether the parties intended their contracts to be legally binding or legally enforceable.
A contract might not be legally enforceable for a variety of reasons. Problems within a contract can make it void. If one of the parties had diminished capacity when the agreement was made, such as a diminished capacity to reason because of age or a mental condition, then the contract might be unenforceable. Fraud or misrepresentation by a party to a contract can void the agreement, as can terms that violate any laws.