(a)What is a contract? (b) Explain six reasons for which a contract can be terminated.

(a) What is a contract?

A contract is a legally binding agreement between two or more competent parties which creates rights and obligations enforceable by law. It arises where there is an offer by one party and an unqualified acceptance by the other, supported by consideration and the intention to create legal relations.

(b) Six reasons for which a contract can be terminated (discharged)

1. Performance: When both parties completely carry out their obligations as agreed, the contract comes to an end.
2. Agreement: The parties may mutually agree to bring the contract to an end before it is performed.
3. Breach: Where one party fails to perform his part or does so defectively, the injured party may treat the contract as terminated.
4. Frustration (impossibility of performance): An unforeseen event beyond the control of the parties, such as destruction of the subject matter or a change in the law, makes performance impossible and ends the contract.
5. Lapse of time: A contract may be terminated when the period fixed for its performance expires.
6. Death or incapacity: The death, insanity or bankruptcy of a party may bring a contract of a personal nature to an end.