What is a Contract?

Tricia Christensen
Tricia Christensen

A contract is an agreement between two or more parties to do, to not do or to promise something. Contracts can come in many forms — oral or written, implied or express and legally enforceable or not. The strongest contract, in terms of enforceability, includes an offer and an acceptance, has consideration for the exchange, clearly sets out the terms of the agreement without ambiguity and is signed by the involved parties who have the proper capacity to enter into the contract. Weaker contracts include verbal agreements or contracts that are drawn up by parties in direct violation of laws within that jurisdiction. There are many aspects related to valid contracts; in fact, an entire course in law school might be devoted to contract law.

Signing a written contract gives the agreement greatest enforceability.
Signing a written contract gives the agreement greatest enforceability.

Everyday Agreements

People tend to think of written documents when the topic of contracts comes up, but the most common types of contracts are actually oral contracts. People pretty much enter into at least one oral contract every day. For example, a mother might tell her daughter that she will get a reward if she behaves properly at a certain event. If the child agrees to the deal, then it is a type of oral contract.

Express contracts contain all of the details of an agreement.
Express contracts contain all of the details of an agreement.

Implied or Express

Contracts and their terms can be implied, which means that the terms are understood without being specified, or express, which means that all of the details are included. Typically, when people think about contracts, they think of express contracts. For example, in a contract for a monetary loan, the person who is getting the loan usually must promise to pay a certain amount at regular intervals and at a certain interest rate until the loan is paid off. In addition, the terms of the loan might include fees for late payments. All of these terms are explicitly laid out in an express, written contract.

All parties who are bound by a contract have to agree to terms with their signature.
All parties who are bound by a contract have to agree to terms with their signature.

Sometimes, however, a term or the entire contract itself is implied. For example, when a customer orders food at a restaurant, he or she enters into an implied, oral contract. The customer and the server do not explicitly state the offer and acceptance for the meal and its prices, taxes and other conditions, but that agreement is implied.

Other Elements of Contracts

Offer and acceptances are fundamental parts of contracts. Without them, parties might be bound to contracts without their consent. Consideration ensures that something is being exchanged. In some cases, the law requires consideration to be adequate — that is, a relatively reasonable price — or nominal, if the price is irrelevant. Other times, the requirement of consideration might be waived in the interest of preventing injustice.


Contracts might or might not be enforceable by law. The example of the agreement between the mother and daughter would not be enforceable by law, whereas the agreement for a loan likely would be enforceable. Whether specific contracts are enforceable by law depends on numerous factors, including whether the parties intended their contracts to be legally binding or legally enforceable.

A contract might not be legally enforceable for a variety of reasons. Problems within a contract can make it void. If one of the parties had diminished capacity when the agreement was made, such as a diminished capacity to reason because of age or a mental condition, then the contract might be unenforceable. Fraud or misrepresentation by a party to a contract can void the agreement, as can terms that violate any laws.

Event halls may establish a contract with food vendors to cater upcoming shows.
Event halls may establish a contract with food vendors to cater upcoming shows.
Tricia Christensen
Tricia Christensen

Tricia has a Literature degree from Sonoma State University and has been a frequent wiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.

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Discussion Comments


A contract is formed when there is an offer and acceptance between an offerer and offeree.

Consider the case of two companies as an example. Buildwell Infrastructure Limited is an emerging company in the construction industry. It has had notable experience of completing projects under tight schedule. As a relatively new entrant it had a good performance record. However there was a sudden economic slowdown which hit the company margins became thin and the company was under recession.

Meanwhile, Supreme Limited, a realty developer, proposed a multi-storied tower on the outskirts of London which shares a safe seismic zoning. The proposed project was slated to be completed within six months. Buildwell submitted its offer clearly stating 70 percent advance payment. It also stated the facing and evacuation of the rocks are subject to site conditions as these may extend the competition time, which Supreme considered and later awarded the project to Build well limited.

However, sudden inclement weather conditions hampered the pace of the project resulting in a delay of over two months, causing a major loss to Supreme. An angry Supreme Limited sued the company and threatened to revoke.

Consider the facts and conditions. There was a valid offer from Buildwell stating its terms of 70 percent in advance. Supreme Limited awarded the contract the contract to Buildwell, but there is no indication of an advance being given. So there is no contract.

Also, Supreme cannot charge Buildwell with delay as as it was impossible to continue the project under inclement conditions or force majeure and thus can be excused from the contract under common law.


Can someone present you with a contract after they have accepted your money? I bought a purebred great Dane and after two weeks, I was presented a written contract and it was never ever mentioned until after the fact. I had no choice but to sign it other wise my AKC papers would be held. Is this legal?


I just signed a contract to buy a house. However the house caught fire even before I moved in. Can I back out of the contract?


My fiance and I applied for a rental agreement on a Thursday. On Saturday, they accepted via email with a "Congratulations. We have decided to give you the apartment." On Monday they, set a time on Thursday to sign the contract. Behind our backs, on that same Monday they re-posted the ad. On Thursday night, late after our scheduled time to sign the contract, they emailed us and said the tenant would not be out on time and they had to rescind the offer. However, the ad that they posted on Monday showed the apartment empty. We have started our move-out process and also started the paperwork for the grant we received to send payments directly to them. We are now without an apartment and living in a hotel. Can we sue for breach of contract?

Since they posted the ad after telling us we got it and then set up signing for the apartment, can we sue for treble damages because we can show that the violation was willful and with intent?


A man came to my house and told us that we would have a set deal and a set amount of money. We have now got it at a higher price with less stuff. What can I do?


P, a car salesman, is advertising one of his cars, made by Ferrari for sale at the price of 50,000 Euro in the newspaper. N sees the advertisement and calls to P offering him 40,000 Euro. P rejects N’s offer and tells N that he would be willing to discuss an offer for 45,000 Euro. N agrees on the price but under the condition that P proves to her that the car is indeed a genuine Ferrari. P promises to disclose all necessary documents in the next three weeks. N agrees and waits. Two weeks later, N discovers that P has sold the car to C for 50,000 Euro. Advise N.


You are the owner and the manager of a restaurant. Missy, the 16 year old runner-up in last year’s Australian Idol whose subsequent single ‘Pimples’ failed miserably in the charts, approaches you about working as a performer in your restaurant. You are keen to hire her, and you negotiate a written agreement which both of you sign.

According to the agreement, Missy will perform exclusively at your restaurant six nights a week for twelve months, and mention your restaurant whenever she speaks to the media. In return, you will pay her $20 per hour and contribute half the cost of Missy’s ongoing singing lessons. After only five months, Missy is offered another recording deal and tells you she is moving to Sydney. Is the agreement between you and Missy legally enforceable? Advise on this situation.


Article 7 in capacity, says there is infant as well as illiteracy. If you are an infant, you have no capacity of entering into a contract except as it concerns your necessaries and if you are an illiterate (not be able to understand the contents of a document) you can rely on the say predictum strictum num est factum suum. Other than this, it is a valid contract.


i signed my mine and my fathers name on an apex home security alarm system contract. i didn't know it was a contract. is the contract void because i signed his name? the top of the contract says, "this agreement is only for the homeowner and apex." am i liable for anything?


anon14356: If she offered to you at a price and you then agreed and all this is documented in e-mail, then you had a meeting of the minds and yes, you could take her to court.

In fact, you should have done this after she jacked the price up the first time. In today's world e-mail contracts can be binding. The important thing is to show that she agreed to sell it to you at a stated price and you agreed to buy it for that price.

If the reverse had occurred, that is, if you changed your mind after the agreement then she could have sued you.

Since whatever she was selling is probably no longer in her possession you could sue her for "Specific Performance". She would have to buy the machine back from the person who bought it and then sell it to you for the agreed upon price or she would have to find another item that is in the same condition and sell it to you.

The more e-mail correspondence you have with her, the better. Using the e-mail headers it is possible to prove the email came from her.

The fact that she sold it for more than what the two of you agreed upon is irrelevant.


Is this a legal verbal contact? A pool contractor was installing an in-ground pool for me and this was a written contract and it was 100% fulfilled. I requested additional work and asked for a price prior to them doing the work. They never provided me with the cost even after 3 requests. I wanted to know the price before authorizing the work. They did the work while I was out of town and sent me an invoice for 3 times the amount I expected to pay (and budgeted for). Do they have a claim? To me this was deceptive and I wouldn't have agreed to the work if I knew the cost. I never actually authorized it.


A seller posted his item on craigslist for $400. I emailed her to buy it and she agreed. After three days, she emails me to inform that she raised the price to $600. I agreed again in her email, finally, she emailed me back that she sold the item to someone higher than $600. She already promised twice to sell me the item and she agreed but she reneged on her promise and instead sold it to someone else. Is the email enforceable contract in small claims court?


anon11951, What the heck you are talking. You want to take your dad to court because he is not paying for your education. Man, If I was the judge, I would make you pay for 5 years of payment of your education to your dad plus all the expense he accrued since your childhood.

Glad I am not like you.


I think you ought to give your dad a break. This was your college education, not his, and parents aren't obligated, though it is nice when they take on this obligation, to pay for college. He's given you 5 years free of payments, which is something. If you can, maybe it's time to take over these loans. Possibly dad has some financial problems of his own?? He declared bankruptcy, so maybe he is not particularly solvent and cannot afford this? Even if you sued him, which is a pretty awful step, you would probably not win, since the loans are in your name.


Regarding oral contracts...my father agreed to pay off my college loans, and he has been making small monthly payments on them for about 5 years now. Yesterday he called me and told me that he's not going to continue making the payments, and that now I'll have to pay off the balance or be in default with the loan company. Problem is, I'm the one who signed the loan papers initially, because my father had declared bankruptcy and that was the only way we could get the loan to go through. Is there any way a court would make him honor his promise to me and have him continue to make payments?

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