What is a contract?
A contract is a legally binding agreement between parties. This legally binding agreement can be written or unwritten. We make agreements every day, but not all agreements are legally binding. It is important for you, the law student, to be able to identify and differentiate between legally binding agreements and non-legally binding agreements.
What do we mean by legally binding?
Legally binding means the courts will provide a remedy if there is a breach of the contract.
What is the role of the English courts in Contract law?
We live in a market capitalist society. Therefore, the courts do not tell us what to put in contracts, but when an innocent party loses money as a result of a breach of a contract, they may ask the court to intervene.
In contract law the court’s main concern is putting the innocent party in the financial position he would have been in had the contract been performed properly. The courts may decide that the innocent party is entitled to a remedy. The remedies available in contract are damages, injunction and specific performance.
However, before the courts can determine if the innocent party is entitled to any of the remedies listed above, they need to be certain that the agreement reached between the parties was a legally binding one.
What makes an agreement legally binding?
To determine that an agreement is legally binding, the courts will look for the following elements, offer, acceptance, consideration, intention to create legal relations and capacity.
Each of these elements has different rules that you will need to learn and apply to problem questions.
Watch this video for more explanation on how to form a contract.