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An Explanation of Contract Law In todays business world of promises and actions sometimes contracts must be made in order to deem those promises legally binding and that simply put defines a contract In general a contract is a legally binding promise West 198 But what constitutes a contract Contracts are simple to understand but involve many aspects which may make the concept of contract law a bit difficult to grasp Perhaps the best way to begin explaining contracts would be to present the four elements of a valid contract Emerson and Hardwicke 81 According to Barrons Business Law on page 81 the following four elements constitute a contract 1 Capacity Both parties must possess the capacity to enter into a contract Whether a contract is verbal or written both parties must be fully capable of understanding the terms of the contract 2 Consideration There must be a value exchanged for a promise In other words one party agrees to a certain set of terms at a certain price 3 Legality The good or service being exchanged must be legal For example a contract with a drug dealer and a user based on credit terms would not stand up in court because drugs obviously are not legal 4 Mutual Agreement Both parties must agree on the terms of the contract An agreement consists of both an offer and an acceptance Perhaps one of the most questioned elements of contract law is contractual capacity Barrons Business Law defines capacity as a legally defined level of mental ability sufficient to reach an agreement113 Contractual capacity questions whether or not a party of the contract understood at the time of contract and actually meant to agree under different circumstances Contractual capacity is basically just a way for certain groups of people to rid themselves of obligations or liabilities established in a contract Emerson and Hardwicke 113 One exception to contractual capacity is the intoxicated
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