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A contract is an agreement that is enforceable by law. Modern business could not
exist without such contracts. Most business transactions involve commitments to
furnish goods, services, or real property; these commitments are usually in the
form of contracts.
Use of the contract in business affairs ensures, to some extent, the performance
of an agreement, for a party that breaks a contract may be sued in court for the
damages caused by the breach. Sometimes, however, a party that breaks a contract
may be persuaded to make an out-of-court settlement, thus saving the expense of
A contract arises when an offer to make a contract is accepted. An offer
contains a promise (for example, "I will pay $1,000") and a request for
something in return (a person's car). The acceptance consists of an assent by
the party to whom the offer is made, showing that the person agrees to the terms
offered. The offer may be terminated in a number of ways. For example, the party
making the offer may cancel it (a revocation), or the party to whom the offer is
made may reject it. When the party to whom the offer is made responds with a
different offer, called a counteroffer, the original offer is terminated. Then
the counteroffer may be accepted by the party making the original offer.
REQUIREMENTS OF A VALID CONTRACT
For a contract to be valid, both parties must give their assent. They must act
in such a way that the other people involved believe their intention is to m...