A Legally Binding Contract.

A contract is defined as a legally enforceable agreement between two or more parties. Contracts do not have to be extensive documents addressing all possible circumstances, although such contracts are much more easily enforced, rather any agreement can be a legally binding contract provided it contains four elements: Offer, Acceptance, Intention, and Consideration.

The physical document of a contract or verbal outlining of terms composes the offer. An offer is simply the clear declaration within the contract of what actions the parties will take. An offer can be verbal or written but for it to be ready for acceptance it must be sufficiently certain. That is to say each term must be outlined as fact not as a suggestion. An expression of interest or proposition of potential terms is not legally binding.


Acceptance is the second half of the contract forming procedure, any valid offer which is accepted is likely to also fulfil the final two elements and therefore be legally binding. It is simply the agreement of the other parties exactly to what was outlined in the offer. The exact offer must be accepted as presented, any changes made to the offer constitute a separate new offer being made, not the acceptance of an offer. For an offer to be acceptable it must also be the most recent offer presented by the other party and, if a timeframe for acceptance was given, be accepted within said timeframe.The way an offer is accepted does not matter as long as the fact that it has been accepted is clear. It is possible that acceptance can be implied by the commencement of the contract’s performance without any formal acceptance.

The final two elements rarely are relevant when determining whether a contract is legally binding since in almost all circumstances they will be unavoidable when entering a contract. Both parties must have an intention for the contract to be legally binding for it to be enforceable. Rarely is a contract free from legal consequences on this basis since it is generally accepted that entering into a contract carries the intention to enter a legal relationship.


The requirement for consideration means that both parties must have something to gain by entering into the contract. This is rarely of issue since a party will be entering into a contract with the intention to gain something. Consideration can be found even in contracts such as charity pledges. If a pledge is given with the agreement for anything in return, perhaps a public announcement of the donation, the pledge can be a legally enforceable contract.

Even when these elements are all fulfilled, as they are in most contracts, it is possible that a contract will be either void or voidable based upon the circumstances in which it was entered. A void contract is not a contract at all, it is not legally enforceable. A contract may be void because it is illegal. For example, if X agreed to pay and paid Y £12,000 for inside information upon which X would trade and Y never provided that information, X would be unable to recover their money from Y. A contract can also be void if one of the parties was mentally incapable and the other party was aware of this. This mental incapability includes intoxication but is subject to proof. Conversely, a voidable contract is one to which a party can ask for a rescission, where both parties are (to the greatest extent possible) returned to a pre-contractual state, at the discretion of a judge. Contracts are voidable in the circumstances of misrepresentation or duress; when one party was tricked into entering the contract with false information or pressured into the contract with threats.

Contributed by Will Andrews

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