CONTRACT: A contract is a legal binding between two companies, businesses or parties that unites them in an agreement which is protected by law. A contract between the parties can be created verbally, in writing, by conduct or by all these means. And this contract becomes a valid contract if it has all the essential elements described as follows: It is important to mention that contract is enforceable only if all these elements are present in the contract.
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ESSENTIALS ELEMENTS OF A BUSINESS CONTRACT AND THEIR IMPORTANCE: i). Offer and acceptance: Offer is the starting point of the contract. In order to create contract there must be a definite and well-defined offer by one party (which will show willingness of the offeror for an action) and clear acceptance of the same by the other party. While making an offer the offering party may specify the time limit for validity of the offer but even if itâ€™snot specified, the offer will be valid for a logical time period, until accepted or cancelled by the offering party. The acceptance of the offer and that means full acceptance to what is being offered not partial (partial acceptance is a counter-offer, which invalidates the contract), validates the offer to transform it into a contract. Though all the elements must be present to create a contract, but offer and acceptance make the basis of the contract or it actually lays the foundation of the legal agreement between the parties. ii). Intention to create legal relationship: A contract requires that the parties aim/propose to enter into a legally binding agreement: i.e; the parties entering into the contract are willing to create legal relations and fully understand that the agreement can be enforced by law. If a contract has been signed between two parties, then one party will be able to sue the other if it does not fulfill the contractual provisions. iii). Competency or ability to get into a contract: The law does not give everyone the liberty to enter into a contract; rather certain specific qualifications are prescribed to achieve the competency to get into a contract. To be legally competent to enter into contract one must be of the age of majority (should not be minor), having sound mind and has not been disqualified by any law. iv). Free consent: Free consent is an essential element of a valid contract. It is inborn for any agreement that all the parties must agree to a common goal. To create a valid contract, mere consent is not enough, rather the consent must be free consent according to law: A free consent is not caused by, coercion, undue influence, fraud, misrepresentation and mistake. v). Lawful Consideration: In order for a contract to be binding it must be held up by valuable consideration.
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