contract

contract A legally binding agreement. Agreement arises as a result of an offer and acceptance, but a number of other requirements must be satisfied for an agreement to be legally binding: • there must be a consideration (unless the contract is by deed); • the parties must have an intention to create legal relations; • the parties must have capacity to contract (i.e. they must be competent to enter a legal obligation, by not being a minor, mentally disordered, or drunk); • the agreement must comply with any formal legal requirements; • the agreement must be legal; • the agreement must not be rendered void either by some common-law or statutory rule or by some inherent defect.In general, no particular formality is required for the creation of a valid contract. It may be oral, written, partly oral and partly written, or even implied from conduct. However, certain contracts are valid only if made by deed (e.g. transfers of shares in statutory companies, transfers of shares in British ships, legal mortgages, certain types of lease) or in writing (e.g. hire-purchase agreements, bills of exchange, promissory notes, contracts for the sale of land made after 21 September 1989), and certain others, though valid, can only be enforced if evidenced in writing (e.g. guarantees, contracts for the sale of land made before 21 September 1989). See also service contract.

Certain contracts, though valid, may be liable to be set aside by one of the parties on such grounds as misrepresentation or the exercise of undue influence. See also affirmation of contract; breach of contract.