There are many definitions of the term “contract”. Usually, contract is defined as any agreement between two or more parties i. e. organizations, businesses, government agencies or individuals with the purpose to exchange something of value. Generally, contracts are presented in written form or seldom are they entirely verbal. There can be a breach in contract when any party fails to find a compromise with others. However, the key elements of any valid contract are agreement, consideration, capacity and legality.
Agreement means that each party is clear about contract’s rights, obligations and details and it fully supports them. To avoid future misunderstanding and disputes all points are dealt down in the contract. No agreement is achieved if any party is bragging and joking or there is no actual agreement. Furthermore, agreement can’t be found if both parties make material mistakes. Consideration means that party must provide something of value to be exchanged if other sides are to be held to the current contract. Read also 8 key elements of a business model
Parties aren’t allowed to obtain something without putting something valuable for exchange. For example, money is considered the most commonly used compensation, but property can be also involved. Illicit acts aren’t consideration and such contract is invalid. Capacity means that each party must have conceptual capacity to enter in to contract signing. It means that parties must be entailed with sufficient legal competency. Legality means that any contract should involve only legal acts; otherwise it would be invalid contract.
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Key Elements of Valid Contract
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Summing up, agreement, consideration, capacity and legality are four key elements making any agreement a valid contract. If any of these elements is violated, then the contract is claimed to be void and illegal. Before signing any contract, parties must carefully get acquainted with all details to avoid misunderstanding and disputes.
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