What is a Legal Contract?

What is a Legal Contract?

A contract is essentially a legally binding agreement – an agreement between two or more persons which creates an obligation to do, or not to do, a particular thing. A contract can also be viewed as a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognises as a duty.

Contract in Gothic Script

(Image: Henry Burrows/Flickr)

At minimum a contract has to satisfy the following aspects: an exchange relationship, created by an oral or written agreement, between two or more persons, containing at least one promise and recognised in law as enforceable. Still, a contract is much more than an agreement between two people. A legal contract requires the following conditions to be met:

Offer and Acceptance

An offer and an acceptance requirement is fulfilled when an offer by one party is accepted by the other party. An offer has to be distinguished from mere willingness to deal or negotiate. For example a seller can offer the buyer a product, the two parties negotiate, but before any agreement is reached, the seller opts out of the deal. At this stage, there is no legally binding contract between the two.

Intention to create Legal Relations

While offer and acceptance lays the groundwork for a legal agreement, it is important to take into account the intention to enter into a legal agreement. Simply offering to help out a friend to move out from his apartment might not be treated as an intention to enter into a legal agreement. Such relations will most probably will not be treated as contracts.


Consideration as a rule is required for a valid contract. Consideration is something of value promised by both parties to a contract that induces them to enter into the agreement. In the case of a friend helping out his friend to move out from his apartment, an intention to create legal relations would more likely be recognised when the helping friend is rewarded for his help.


A legal contract must involve the elements of proper understanding of what the parties are doing and free will. A genuine consent is required by both parties for the contract to be binding.

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