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Finance - Valid Contract - Assignment Example
Author : darion57
Finance & Accounting
Pages 3 (753 words)
VALID CONTRACTS Date A contract is a written or oral agreement between two or more parties, each party with his/her obligation that is legally binding. Contracts are different from agreements from the fact that all agreements need not to be legally binding while all contracts must be agreements that are recognized by law…
Before a contract becomes legally binding, there are some essentials that must be satisfied otherwise referred to as elements of a contract. Elements of a valid contract are: 1. Offer and acceptance In a contract, there are two parties: the offeror and the offerree. The offeror makes an offer that has to be accepted by the offered without alteration of the terms i.e. the offer must be accepted precisely (Burnett, 2010). The promise by one party to do or not to do something if the party accepts to do or not do something in return is referred to as an offer. Where the offered gives new terms in order to accept the contact, then this will be referred to as a counter offer. Both an offer and acceptance must be communicated (Burnett, 2010). Advertisement, preliminary negotiations or opinions does not constitute an offer but are considered an action to treat. 2. Intention to create a legal relation An agreement in itself does not constitute a contract unless the parties to the contract intend to be legally bound in their agreement hence an agreement between minors does not constitute a contract (Liuzzo, 2010). Proof of creating a legal binding agreement is therefore mandatory. 3. Consideration Consideration is the price paid in return of the promise of another party. The consideration must have value not necessarily money. ...