I remember very vividly a scene from a 1970s comedy in which the hapless hero of the piece accidentally becomes engaged to a young woman and spends the entire show plotting fun ways to escape this engagement. At the end of the vignette, the guy breaks the engagement, receives a loud slap from the anguished lady, and is immediately told that he will sue him for breach of promise.
During the 1970s, for those who are not old enough to remember, getting engaged was a very serious matter, as an engagement was considered a legal contract and, in fact, one could be sued for failing to bring an engagement to an end. logical. The legality of this form of contract was eventually terminated, but what exactly constitutes a contract?
First, let’s define a contract. A contract is an agreement between two or more parties that is enforceable by law.
This doesn’t really help us much, as all contracts are agreements but not all agreements are contracts. Let’s look at an example … if two people agree to meet in a bar at seven o’clock, this does not constitute a contract … so there must be other criteria established to form a contract … for a contract to be valid, three questions should be asked.
1. Has a contract been formed? For a contract to be in force and legally binding, these elements must be met.
o Offer and acceptance. One party must have made an offer that the other party accepts without reservation. An example would be when Geoff offers to sell his yacht to Mark for £ 5,000 and Mark accepts this verbal offer … provided other criteria are met a contract will be deemed to exist.
o Intent to create legal relationships. There must always have been the intention behind the agreement that if a dispute arose, the agreement should be subject to a court of law.
o Purchase or exchange of assets. In its simplest terms, there must be a debit and credit element for both parties; for example, in the sale of a yacht, the seller will suffer the ‘loss’ of his yacht but will make a profit of £ 5,000 … conversely, the buyer will suffer the ‘loss’ of £ 5,000 but receive the benefit of the yacht ownership.
o Capacity. Each of the parties must have the legal capacity to enter into the contract; for example, minors and people with “mental disorders” are limited in their powers to enter into contracts.
o Format. In some cases, a contract must have a specific format, for example, some contracts must be in writing.
2. Is the agreement recognizable and enforceable by law? Some contracts will cease to be valid due to factors such as errors or undue influence. Examples can be errors on an invoice marked ‘E & OE’ or the example of a ‘shotgun wedding’.
3. When do the parties’ obligations end and what remedies exist for breach of contract?
There we have all the criteria required for a contract. The actual drafting of a business contract, unsurprisingly, would almost certainly require the services of an attorney, but imagine that a contract was with a foreign party. In that case, the services of a specialized legal translation agency would undoubtedly be needed to avoid errors or omissions that could invalidate it.
