Introduction
A contract is an agreement that is made between two or more persons and is a legally binding contract. It is also enforceable by the court of law. It is optional to have a contract created in writing form. Sometimes, the contracting party makes it through verbal or oral terms of an offer or contract. An excellent example of a verbal contract is when a sole proprietor and business sales manager verbally make extra caution, make an offer, and accept that the statement between them is binding. Here in this article, we discuss what elements make a legally binding contract. When can a promise be treated as a binding contract, what boilerplate provision for the contract, and what is a binding and nonbinding contract? So please stay tuned and read below;
Definition and meaning of a legally binding contract
In simple words, any contracting party enters into the contract in writing. They agree to the terms and conditions of the contract, which is legally enforceable by the court of law if any party does not fulfil his contractual obligation. That contract is called a binding contract in legal terms.
How to create a legally binding contract?
Making a legally binding contract has some elements that must be fulfilled under the criteria of law with the capacity and legal purpose. Based on that contract, the court can render the judgment if any contracting party fails to fulfil his obligation of the part. Or ties to make a breach of contract. In that event, the court can order the contracting party to perform their role as per the contract and protect the injured party’s rights.
A contract contains some terms, conditions, offers, and acceptance. The party mutually agrees on those and is ready for the performance of the contract. If that part is missing in the agreement or there is no legal purpose of capacity, then such a contract can not bind to the party and can not be enforceable in a court of law.
When does a promise of one party to another become a binding contract?
Suppose one party makes a statement or promise to another party. On that basis, another act is taken by another party, which causes them to suffer financial harm. In that case, the court of law treats such a statement as a valid contract. Here, another party is entitled to recover what he lost for his action, which he takes based on that statement. There is no requirement for the court to consider whether there is agreement or consideration while enforcing a promise. And it is also challenging to prove that such a statement was made without it.
What is a non-binding contract under the law?
A non-binding contract lacks one of the elements required to be binding or includes non-binding language, such as stating that it is non-binding.
Elements of a binding contract
A legally binding contract has some particular elements that make it a valid contract; these are given below;
Offer and acceptance:
When someone offers something of value in exchange for something else, it’s called an offer. After the value is presented, the individual must choose to either accept or decline it.
Consideration:
The consideration in a contract refers to the value exchanged by both parties, which can include money, services, or objects.
The intention of contracting parties:
In a contract, the term “intention” unequivocally denotes the joint objective of all parties involved to establish a bona fide, binding agreement that can and will be enforced.
Legality of contract:
For a contract to hold legal validity, it must not contain any commitments or compensations forbidden by law. A promise to do something illegal is an example of unlawful consideration.
Capacity of contracting parties:
Capacity refers to a person’s legal ability to sign a contract. For example, in most cases, a person under the age of 18 is not legally allowed to sign a contract. A contract becomes binding when it includes all necessary elements and avoids invalidating issues such as undue influence, coercion, or duress.
Conclusion
A contract must serve a legal purpose to be enforceable. If a contract meets the requirements of an illegal act or has an unlawful objective, it is an unenforceable contract or not binding in the eyes of the law.
