A contract serves as the binding symbol of agreement between two or more people or parties. Non-compliance to a contract, may it be an implied contract or express, could mean a lawsuit.
But to be able to understand why breaching a contract is grounds for a lawsuit, one should identify the elements that makes a contract legal and valid.
- Agreement (Offer & Acceptance): Offer is defined as the "willingness to enter into a bargain so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it." In order for an agreement to be considered, one party should make an offer that will be accepted by the other party. The offer should be precise and all the details on it should be kept. The party who made the offer can withdraw it as long as he informs the recipient about his withdrawal. In order for the offer to be accepted, the recipient should answer the offer and agree to it through a statement. Not expressing interest or lack of it to the offer does not qualify as agreeing.
- Legal capacity: People who will enter into a contract should be legally and competent enough to do so. The contracts made by people who have a mental impairment, minors, people who are bankrupt, people acting on behalf of a company or corporation, and prisoners involve problematic consent.
- Consideration: Consideration states that each participating party should receive something of value, although it doesn't need to be in monetary form. The court will not question the contract as long as consideration exists and as long as it is not illegal or impossible. An exception to that are documents under seal or deeds.
- Intention to create legal relations: A contract is made for legal purposes. Therefore, the offer should be an agreement that is legally accepted. Both parties should have the intention and are aware that they are going into a legally binding agreement.
- Consent: The consent of the parties entering into a contract should be genuine. The parties' compliance to the contract is of free will, and that they have a proper understanding of what the other involved parties are doing.
- Mutuality of Obligation: This is considered as the "meeting of the minds," which means that all involved parties agreed to the details of the contract. They should have a mutual understanding of all the provisions in it.