An agreement becomes a contract if certain key elements are present. While it’s often said that a verbal agreement is not worth the paper it’s written on, there are actually many situations where verbal agreements can become legally binding. The following are the factors that determine whether an agreement is legally binding:
1. Offer and Acceptance
The first element needed for an agreement to become a contract is a clear offer and acceptance. An offer is a proposal made by one party to another, expressing the intention to enter into a legal agreement. The offer needs to be clear and specific, outlining the terms of the agreement. Acceptance must also be clear, whether it is verbal, written, or through conduct.
Consideration is the exchange of something of value between the parties of the agreement. Such consideration can be in the form of money, goods, or services. Agreement without consideration is not legally binding. Both parties must agree on the amount and nature of the consideration.
3. Legal Capacity
Both parties to the agreement should have the legal capacity to enter into a contract. Parties must be of legal age, with sound mind and free to contract. In many cases, a minor or a person who is not of sound mind cannot enter into a legally binding agreement.
4. Mutual Consent
The agreement must be formed with mutual consent between both parties. All the parties should be in agreement with the terms and conditions of the contract. If either party coerces or misleads the other party in any way to enter into the contract, then it is not legally binding.
The agreement must be legal and not against the law. Any agreements that require illegal acts or services are not enforceable in court.
6. Intention to Create Legal Relations
Both parties to the agreement should show an intention to enter into a legal agreement. This is particularly important when it comes to agreements between family members or friends. If there is no intention to create legal relations, then an agreement between family members or friends will not be legally binding.
In conclusion, an agreement becomes a contract if the conditions of offer and acceptance, consideration, legal capacity, mutual consent, legality, and intention to create legal relations are met. All of these conditions together make for a legally binding agreement. It is essential to understand the legal implications of any agreement before you agree to it. This helps to avoid any future legal disputes.