Contract law is the wide body of law which governs all contracts, written and oral in any legal subject matter. The term ‘legal subject matter’ is used in the definition because contract on illegal activity such as to traffic drugs, commit a crime, or to engage in activities such gambling or sexual activity cannot be enforced in court of law. Contract law is one of the widest and most important branches of law. Everyday you read or hear of contract of employment, contract to supply certain goods or services, contract to build something such as road, bridge, aircraft, etc.
A contract creates an obligation of both parties in which one party must discharge some certain obligations such doing the work, rendering service, building something, etc while the other has an obligation such as to pay the agreed money. The content and provision of the contract can vary depending on the nature of service being contracted upon.
To understand the basics and essence of contract law it is important to know the various types of contracts which can be recognized and enforced by the courts. The first type of contract is the express contract in which promises are communicated orally or in writing. An implied contract comes to existence by the conduct of the parties indicating that they have agreed to be bound. Unilateral contract refers to the type of contract in which one of the parties accepts an offer made by the other party through the performance of the act requested. Bilateral contract refers to contract that comes in to existence by one person accepting the offer made by the other party and promising to do the act requested.
Who can enter in to binding contract? Generally any person of the majority age who is of sound mind can enter in to contract. For most jurisdictions, the majority age in which one is allowed to enter bin to contract is 18 years. Corporations, companies, organizations, institutions and other entities considered legal person in law can also enter in to contract by express or implied actions of their authorized employees, officers and agents. Contract law provides that individuals associated with certain corporation, institution or organization cannot be held personally responsible for breach of contract or be personally liable for liabilities and debts of the company although there are exceptions to this rule.
There are some basic elements of contract which form the basis of contract law. These elements must be present in any contract to be considered legally binding. The first is an offer. This is an expression of willingness either expressly or impliedly to be bound by the contract. An offer is different from invitation to treat which refers to inviting other people to make an offer. For example, a good displayed on shop is invitation to treat since the sellers want to you to make an offer to buy and they can reject or accept that offer.
Acceptance is the second element of legally binding contract and refers to expression of unconditional agreement and acceptance to the terms in the offer. The acceptance can be in writing or oral. The contract law of most countries requires that contract should be in writing.
Third, there must be consideration. In contract law, consideration principle requires that each of the parties must receive something valuable.
Lastly, there must be intention to create legal relations. The party should enter in to agreement such that they can seek court remedy to enforce their rights under the contractual agreement.