Frequently Asked Questions about Contract Law
What is contract law?
Contract law is a branch of law in the United Kingdom that governs the formation, interpretation, and enforcement of legally binding agreements between parties. It establishes the rights and obligations of parties involved in a contract and sets the legal framework for resolving disputes if a breach occurs. The key elements of contract law include offer, acceptance, consideration, intention to create legal relations, and certainty of terms.
What is acceptance in the law of contract?
Acceptance in contract law refers to the unequivocal agreement by the offeree to the terms and conditions of an offer made to them by the offeror. It is the final, unqualified expression of assent to the terms of the offer, creating a legally binding contract between the parties. Acceptance must be communicated to the offeror and can be made either explicitly, through written or spoken words, or implicitly, through actions that objectively demonstrate the offeree's consent to the offer.
What is consideration in contract law?
In UK contract law, consideration refers to the exchange of something valuable between the parties involved in a contract. It is a crucial element for forming a legally binding contract. Each party must either provide a benefit to the other or suffer a detriment as part of the agreement. Consideration can take various forms, such as money, goods, services, or a promise to perform or refrain from performing an action.
What is an offer in the law of contract?
An offer in contract law is a clear, definite and unequivocal statement expressing one party's willingness to enter into a legally binding agreement with another party, under specific terms and conditions. It must be communicated to the offeree and show an intention to be legally bound upon acceptance. An offer can be made in various forms, such as in writing, verbally or through conduct. The offer is the starting point of forming a contract and may be subject to negotiation or revocation until it is accepted.
How is a contract formed in law?
A contract is formed in law when there is a clear offer made by one party, an unequivocal acceptance of that offer by another party, consideration exchanged by both parties, and the intention to create a legally binding agreement between them. Additionally, both parties must have the capacity to enter into a contract and the contract must adhere to the laws and regulations governing it.
What Are The 5 Essential Elements Of A Contract?
When entering into a contract, there are many factors to consider. It’s important to be aware of the potential legal liabilities that could arise if the agreement is not enforced properly. To ensure you have a legally binding contract, there are five essential elements that must be present in any contract: offer, acceptance, consideration, intention and capacity. In this article, we will go through each element and explain why they are so important. By understanding these elements of a contract, you can make sure your agreements are legally sound and help protect yourself from future disputes.
What is a contract?
A contract is an agreement between two or more parties that creates obligations that are enforceable by law. A contract can be either written or oral, and it can be enforced by either the courts or by specific performance.
There are four essential elements of a contract: offer, acceptance, consideration, and intention to create legal relations. An offer is an expression of willingness to enter into a contract on certain terms. An acceptance is an unqualified agreement to all the terms of an offer. Consideration is something of value given by one party to another in exchange for entering into a contract. Intention to create legal relations means that the parties must have intended for the contract to be legally binding.
The 5 essential elements of a contract
1. Offer: An offer is a proposal to enter into a contract. The offer must be clear and certain, and it must be made with the intention of creating a legally binding agreement.
2. Acceptance: An acceptance is an agreement to the terms of an offer. The acceptance must be unequivocal and made with the intention of creating a legally binding agreement.
3. Consideration: Consideration is something of value that is exchanged between the parties to a contract. Each party must receive something of value in order to be bound by the contract.
4. Capacity: The parties to a contract must have the legal ability to enter into the agreement. This means that they must be of legal age and sound mind, and they must not be under any legal disability that would prevent them from understanding the terms of the contract.
5. Legality: The subject matter of a contract must be legal
How to write a contract
There are a few key elements that must be present in order for a contract to be legally binding. First, there must be an offer made by one party and accepted by the other. This can be done verbally, in writing, or through conduct (such as beginning performance under the terms of the contract). Second, each party must have the legal capacity to enter into the contract. This means they must be of sound mind and not under the influence of drugs or alcohol, among other things. Third, there must be consideration present in the contract, which is something of value that is exchanged by each party for the promise made in the contract. Lastly, the parties must intend for the contract to be legally binding. If all of these elements are present, then you have a valid and enforceable contract!
When to sign a contract
1. When to sign a contract:
It is important to understand when you are required to sign a contract in order to be bound by its terms. In general, you will be asked to sign a contract when:
-You are entering into a business transaction with another party
-You are hiring someone to provide services
-You are leasing property or equipment
-You are purchasing goods or services
Conclusion
Knowing the five essential elements of a contract can help you make sure that your agreement is legally binding and enforceable. Remember, every contract needs to have an offer, acceptance, consideration, capacity, and legality in order to be considered valid. If any of these elements are missing or unclear in the document then it may not hold up in court. Always take time when drafting a contract to ensure that all of these components are present and understood by both parties before signing on the dotted line.
Essentials of a Contract
What makes a valid contract? A valid contract is enforceable by law and if a contract is not valid it may lead to obstruction of businesses and unlawful and insincere dealings. Let us learn about the essential features of a valid contract.
Essentials of a Valid Contract
A contract that is not a valid contract will have many problems for the parties involved. For this reason, we must be fully aware of the various elements of a valid contract. In other words, here we shall ponder on all the ramifications of the definition of the contract as provided by The Indian Contract Act, 1872.
The Indian Contract Act, 1872 itself defines and lists the Essentials of a Contract either directly or through interpretation through various judgments of the Indian judiciary. Section 10 of the contract enumerates certain points that are essential for valid contracts like Free consent, Competency Of the parties, Lawful consideration, etc.
Other than these there are some we can interpret from the context of the contract which is also essential Let us see.

1] Two Parties
So you decide to sell your car to yourself! Let us say to avoid tax or some other sinister purpose. Will that be possible? Can you have a contract with yourself? The answer is no, unfortunately. You can’t get into a contract with yourself.
A Valid Contract must involve at least two parties identified by the contact. One of these parties will make the proposal and the other is the party that shall eventually accept it. Both the parties must have either what is known as a legal existence e.g. companies, schools, organizations, etc. or must be natural persons.
For Example: In the case State of Gujarat vs Ramanlal S & Co. – A business partnership was dissolved and assets were distributed among the partners as per the settlement. However, all transactions that fall under a contract are liable for taxation by the office of the State Sales Tax Officer. However, the court held that this transaction was not a sale because the parties involved were business partners and thus joint owners. For a sale, we need a buyer (party one) and a seller (party two) which must be different people.
2] Intent Of Legal Obligations
The parties that are subject to a contract must have clear intentions of creating a legal relationship between them. What this means is those agreements that are not enforceable by the law e.g. social or domestic agreements between relatives or neighbors are not enforceable in a court of law and thus any such agreement can’t become a valid contract.
3] Case Specific Contracts
Some contracts have special conditions that if not observed would render them invalid or void. For example, the Contract of Insurance is not a valid contract unless it is in the written form.
Similarly, in the case of contracts like contracts for immovable properties, registration of contract is necessary under the law for these to be valid.
4] Certainty of Meaning
Consider this statement “I agree to pay Mr. X a desirable amount for his house at so and so location”. Is this a valid contract even if all the parties agree to this term? Of course, it can’t be as “desirable amount” is not well defined and has no certainty of meaning. Thus we say that a valid contract must have certainty of Meaning.
5] Possibility Of Performance Of an Agreement
Suppose two people decide to get into an agreement where a person A agrees to bring back the person B’s dead relative back to life. Even when all the parties agree and all other conditions of a contract are satisfied, this is not valid because bringing someone back from the dead is an impossible task. Thus the agreement is not possible to be enforced and the contract is not valid.
6] Free Consent
Consent is crucial for an agreement and thus for a valid contract. If two people reach a similar agreement in the same sense, they are said to consent to the promise. However, for a valid contract, we must have free consent which means that the two parties must have reached consent without either of them being influenced, coerced, misrepresented or tricked into it. In other words, we say that if the consent of either of the parties is vitiated knowingly or by mistake, the contract between the parties is no longer valid.
7] Competency Of the Parties
Section 11 of the Indian Contract Act, 1872 is:
“Who are competent to contract — Every person is competent to contract who is (1) of the age of majority according to the law to which he is subject, and who is (2) of sound mind and is (3) not disqualified from contracting by any law to which he is subject.”
Let us see these qualifications in detail:
- refers to the fact that the person must be at least 18 years old or more.
- means that the party or the person should be able to fully understand the terms or promises of the contract at the time of the formulation of the contract.
- states that the party should not be disqualified by any other legal ramifications. For example, if the person is a convict, a foreign sovereign, or an alien enemy, etc., they may not enter into a contract.
8] Consideration
Quid Pro Quo means ‘something in return’ which means that the parties must accrue in the form of some profit, rights, interest, etc. or seem to have some form of valuable “consideration”.
For example, if you decide to sell your watch for Rs. 500 to your friend, then your promise to give the rights to the watch to your friend is a consideration for your friend. Also, your friend’s promise to pay Rs. 500 is a consideration for you.
9] Lawful Consideration
In Section 23 of the Act, the unlawful considerations are defined as all those which:
- it is forbidden by law.
- is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent.
- involves or implies, injury to the person or property of another
- the Court regards it as immoral or opposed to public policy
These conditions will render the agreement illegal.
Solved Example on Valid Contracts
Q: A agrees to help B build his house since they are friends. Is this a contract?
Ans: No this is not a contract. There is intention between A and B to create a legal relation, which is an essential of a contract. Hence this is not a contract in the eyes of the law.
What is consideration in a contract?
Consideration is an essential part of a contract. In fact, a contract isn’t legally binding without it. But what exactly does it mean, and what does (and doesn’t) count as consideration? Find out in this Juro explainer.
What is consideration in a contract?
Consideration is a legal term used to describe the benefit each party to a contract receives. This is often payment in exchange for goods or services. Consideration doesn’t actually have to be money though – it can be anything of value that you get as part of a contract, like equipment or work. In short, it’s what you agree to give in a contract, to get what you want as a result of the relationship.
Consideration is a key element of a contract. In the UK, business contracts need to include the following to be legally binding:
- Offer
- Acceptance
- Consideration
- Intention to be legally bound
- Contractual capacity
In the US, legal doctrine varies slightly, and the key elements are:
- Offer
- Acceptance
- Awareness
- Consideration
- Capacity
- Legality
All these elements must be present for a contract to be binding, and if just one of them is missing, the agreement may not be legally enforceable.
Consideration is perhaps the element of a legal agreement mostly commonly the subject of contract negotiation - so it’s worth digging in to find out more.
How does consideration work in a contract?
For a contract to be legal, there must be “mutuality of obligation”, which means both parties must meet their obligations. And consideration is the commitment the parties make to each other. This means both parties must be exchanging one thing of value for another.
It doesn’t have to be a large value – it simply has to be “sufficient”. As we mentioned above, it also doesn’t have to be money (although it often is). Some examples include:
- services, or knowledge and expertise – like painting a house or consulting on a project
- a promise to do something, like transfer ownership (e.g. if you’re selling/buying a car or house, or intellectual property), or to create or develop something (like computer software or a wedding cake)
- a promise not to do something (called a “restrictive covenant”) – like not working for a competitor for several months after leaving an employer, or not having a pet in a rental property
- property of any kind (whether that’s a house, land, or an “intangible” like stocks or bonds)
As well as being a promise to do something, consideration must also be “fresh”. This means that one of the parties hasn’t given or delivered the service or payment (or whatever) already, and isn’t already contractually obliged to do it.
And finally, consideration can be executed or executory. If it’s executed, then one party has already performed their part of the contract, while the other has yet to do theirs.
For example, imagine you pay a caterer in advance to make a buffet for your birthday party. The executed consideration is the payment you’ve made in exchange for the caterer’s promise to make your finger food and canapés.
Executory consideration is when promises are exchanged between both parties, for example if you promise to pay the caterer after they deliver those vol-au-vents and blinis.
When is consideration invalid in a contract?
Consideration must have value in the eyes of the law. If it doesn’t, a court might decide it isn’t valid. So what type of things don’t meet the definition of consideration?
- The promise of a future gift - for example, if I promise to gift you a painting if you complete a project for me. ‘Donative’ promises aren’t enforceable, because there’s no consideration.
- An illusory promise. This sounds a little bit Hogwarts, but actually just means a promise that’s too vague or open-ended. Like, “If you pay me £500 I’ll paint your house when I have time”, or “If your cakes are high-quality, I’ll buy my wedding cake from you”.
- If one of the parties was already legally obliged to do something. For example, a police officer can’t claim a reward for catching a criminal, because they’re already legally bound to catch bad guys (and gals) as part of their job.
- Anything that both parties haven’t agreed on.
Without valid consideration, a key element of the contract is missing, which means the agreement isn’t legally binding. This doesn’t mean you can’t still follow the course of action described in the document - but it’s not a contract in the eyes of the law (for example, a breach of contract isn’t possible) and you can’t enforce it in court.
Certainty in contract law – navigating the essentials
The concept of contract certainty holds significant importance in agreements and transactions. For businesses operating under the jurisdiction of UK law, understanding what certainty means in contract law is vital to ensure valid and binding contracts.
In this article, we'll delve into the key aspects of contractual certainty and why it matters to small business owners.
What is certainty in contract law?
Certainty in contract law refers to the clarity and precision of the terms and conditions within a contractual agreement. All parties involved in a contract need to fully understand and interpret its terms. A contract should be a complete and final agreement, leaving no room for ambiguity or misunderstanding.
Do contracts need certainty?
Certainty is the cornerstone of a legally binding contract. Without it, contracts are susceptible to disputes and legal challenges as to their validity. Ensuring your contract has certainty is important to protect your interests and maintain trust with partners, customers and suppliers. Contracts which are too vague or not capable of judicial interpretation may be void by reason of uncertainty.
Contract certainty requirements
Contract certainty entails several aspects as follows:
- Agreement of all terms – all parties must agree on every aspect of the deal, including price, delivery, payment terms and any special conditions etc, and these should all be explicitly set out in the contract (this is very important as otherwise there can be a lack of certainty as to the parties’ intentions)
- Written contract – in many cases, contracts should be in writing to provide a clear record of the agreement reached and to act as an ongoing reference point as the business relationship develops
- Clear drafting – all terms and conditions should be explicitly stated (and not vague and uncertain) within the contract, leaving no room for interpretation
Contract certainty timescales
In contract law, specific timescales play an important role in ensuring contractual certainty. Any deadlines or timescales specified in a contract should be clear, unambiguous and capable of enforcement.
Failure to specify deadlines precisely can lead to disputes and legal challenges. This is particularly the case when the timescales are at the heart of the contract, such as for example delivery deadlines or service of notice deadlines.
Avoid vague terms
Confusion often arises when contract terms and definitions are vague or open to multiple interpretations. You may find yourself in disputes if you haven't clearly defined your agreements.
How is contract certainty governed?
In the UK, contract certainty is primarily governed by English contract law. English contract law sets the framework for how contracts are formed, interpreted and enforced. You should familiarise yourself with these legal principles to ensure compliance or speak to one of our expert contract lawyers.
Learn more about our contract services
Get legal assistance from LawBite
Ensuring contractual certainty is crucial for the validity and enforceability of contracts, as it mitigates disputes over their interpretation. By understanding the requirements and principles of contract certainty, you can navigate the legal landscape more confidently and position your business for success.
If you’re unsure about the certainty of a contract, our contract review services start at just £180+ VAT for a short contract review. Our team of experienced contract lawyers will meticulously examine your contracts, ensuring they meet the highest standards of clarity and certainty.
Trust LawBite as your partner in navigating the legal landscape, safeguarding your business and positioning it for success. To speak to one of our expert contract lawyers, book a free 15 minute consultation or call us on 020 3808 8314.
Additional resources
- Breach of contract – a quick guide
- Frustration of contract - what you need to know
- What is assignment in contract law
- How to negotiate a contract
- Contract - what is consideration
- How to novate a contract
In closing
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