Business relationships are deeply rooted in the law of contract'. (a) What is a contract? (b) State the essential elements of a valid contract. (ii) Briefly...

(a) What is a contract?

A contract is a legally binding agreement between two or more persons which creates rights and obligations that the law will enforce. It is an agreement which, once validly made, the parties can be compelled by a court of law to honour.

(b) Essential elements of a valid contract

• Offer
• Acceptance
• Consideration
• Intention to create legal relations
• Capacity of the parties
• Genuine consent (free consent)
• Legality of purpose (lawful object)

Brief discussion of three of them

• Offer and acceptance: There must be a definite proposal (offer) made by one party and an unqualified agreement to that proposal (acceptance) by the other. The acceptance must exactly match the terms of the offer for an agreement to exist.
• Consideration: Each party must give something of value in exchange for what he receives. Consideration may be money, goods, services or a promise. Without consideration on both sides (except in a contract under seal), the agreement is not enforceable.
• Capacity of the parties: The parties must be legally competent to contract. Persons such as infants (minors), lunatics and drunken persons have limited capacity, so contracts made with them may not be fully binding.