Contract Definition Paper

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Contract Definition Paper

Brian Olson
Business Law
8 January 2001
A contract is a binding agreement made between two competent parties that can be written verbal or implied. The purpose of a contract is to create an agreement that can be supported by the law (West’s Encyclopedia). As we enter the new millenium, and with the increase in the number of businesses (including e-commerce), we need to know more and more about contract law. Knowledge of contract law can also protect consumers and businesses from misunderstandings. The six elements of a contract are: binding agreement, competent parties, form required by law, legal in purpose, consideration, and genuine assent.
Binding Agreement
A binding agreement is a contract, verbal or written, between parties that is bound by law. When two competent parties make an agreement, it is considered binding. A binding agreement must have an offer and an acceptance. An example of a binding agreement would be if Kelly told Jamie that she would buy her car for $6,000 and they both agreed to it. This agreement is legal in purpose, supported by consideration, is in the form required by law and is made by two competent parties who gave genuine assent.
Competent Parties
To make an agreement a legal contract, both parties have to be competent. All adults are assumed to be competent. It’s important for people who are making contracts to be of sound mind. This means that the people involved cannot be under the influence of any substances or be mentally ill. Convicts and enemy aliens are also considered to lack capacity. Capacity means the ability to understand one’s actions and the effects of those actions. It is legal for minors to enter into contracts, but they cannot be bound by law because younger people have limited experience and are more vulnerable than adults (Mietus 163).
The purpose of competency is so people don’t take advantage of those who are not competent when entering into contracts. When an adult makes a contract with a minor, the minor is the only one who can disaffirm the contract. The adult is bound by law (Mietus 163).
An example of a contract that cannot legally be bound would be if John wanted to buy Ryan’s car for $2000 and Ryan refused. Later that day, John took Ryan out to a bar and offered him several drinks. John offered to buy Ryan’s car again and Ryan agreed because he was under the influence of alcohol. Due to Ryan’s lack of competency, this contract is void.
Consideration
Consideration is the ...

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