A contract is a written or spoken agreement especially one concerning employment, sales or tenancy that is intended to be enforceable by the law. A contract is any legally binding or valid agreement between two parties. The law will consider any contract valid if the agreement contains the following;
· Offer and acceptance: An offer is described as an unequivocal pledge to do or not do something while an acceptance, on the other hand, is the final expression of an assent to an offer given by the person to whom the offer was addressed.
· An intention between two parties to create binding relations
· Consideration: A consideration is something offered in exchange for another. It is the price for the benefit derived.
· Legal capacity of the parties to act
· Genuine consent of both parties
· Legality of the agreement.
It should be noted that offer and acceptance must be made with an intention to be bound by the offer or acceptance. An acceptance must purport to assent to an offer. It must neither vary it nor substitute it with other terms. Offer and acceptance may be made expressly or impliedly by conduct.
Not all contracts have to be written on a piece of paper and signed with an inked pen. Verbal contracts are also valid; an email can also constitute a valid contract. All that is required is that the above should be present and then it’s a contract. However, the law requires that contract is written down and signed in specific areas. These areas include;
1. Contract for the transfer of a copyright
2. Contracts in consideration of a marriage
3. Contracts which cannot be performed within one year
4. Contracts for the transfer of the interest in land
5. Contract for sales of goods above a certain value
6. Contract for suretyship or guarantee
7. Contracts by executors of a will to pay a debt of the estate with their own money.
Businesses depend on the sanctity of contracts to thrive. It is this guarantee by the state that enables SMEs owners to continually engage and enter into transactions with one another for economic gain and development. Without a valid contract, any agreement would be a mere promise which is binding by honour only and not enforceable by the court of law.