Contract

A contract is made up of an agreement that is legally binding between two or more parties

which is able to be enforced through the courts. In order for a contract to be binding, there
are four main elements that must be present: offer, acceptance, intention to enter legal
relations, and consideration.

ESSENTIALS OF CONTRACT
The buyer and his or her team have conducted the negotiation and the parties have reached
an agreement. However, reaching agreement is not the end of the negotiation process by any
means. Rather, an agreement merely represents the beginning of the contract’s performance
for the item, service or activity covered by the agreement. An important part of executing and
following through on a negotiated agreement is loading the agreement into a corporate
contract system so that others throughout the organisation have visibility of the agreement.

The terms and conditions of the official contracts should clearly stipulate the rights and
obligations of both the supplier and the buying organisation in line with the agreement. A
draft document, which can be prepared by either party, is used to confirm both parties’
understanding of their commitments before execution.

The buyer must be aware that a valid contract is a promise or agreement that the law will
enforce. To be legally enforceable, a contract must satisfy the following essentials:

1.  Intention: Both parties must intend to enter into a legal relationship.

2.  Agreement: In a dispute, the court must be satisfied that the contracting parties had
reached a firm agreement and were not still negotiating. Agreement will usually be shown by
the unconditional acceptance of an offer. It is important to determine by whom the offer is
made, whether the offer is valid and if it has been accepted. There is an agreement only when
the offer is accepted.

3.  Consideration: The definition of consideration is that something of value passes from

one party to a second party in exchange for a promise from the second party. The value must
be consistent with the second party’s promise. Law of contract is concerned with bargains,
not mere promises. Thus, if A promises to give something to B, B will have no remedy if A
breaks his promise. If, however, B has undertaken to do something in return so that A’s
promise is dependent on B’s, the mutual exchange of promises turns the arrangement into a
contract. The consideration must also exist and have some ascertainable value, however
slight, otherwise there is no contract.

4.  Form: Certain exceptional types of agreement are only valid if made in a particular way,
such as in writing. Thus, conveyances of lands and leases for over three years must be by
deed. The absence of written evidence, while not affecting the validity of a contract, may
make it unenforceable in the courts. This evidence may be from correspondence or any other
documentation made at the time the contract was made or subsequently. Such written
evidence must clearly identify the parties against whom the evidence is to be used or by
authorised agent.

5.  Definite terms: There will be no contract if it is not possible to determine what has been
agreed between the parties. Where essential terms have yet to be decided, the parties are still
in the stage of negotiation. An agreement to agree in future is not a contract.
 6.  Legality: The definition of a valid contract is that the product or service contracted must
be legal and not against public policy. The court cannot enforce a contract that is illegal, e.g.,
contracts to defraud the Inland Revenue. Immoral contracts, such as agreements to fix prices
or regulate suppliers, while not illegal are void unless the parties can prove to the court that
their agreement is beneficial and in the public interest.

7.  Capability: Both parties must know what they are doing. This standard clearly
eliminates parties who are impaired in any way. Impairment includes an insane person, a
confirmed alcoholic and a confirmed drug addict. It is important to acknowledge that these
conditions must be confirmed through adjudication.

What does it mean to terminate a contract?

To terminate a contract means to end the contract prior to it being fully performed by the
parties. In other words prior to the parties performing all of their respective obligations
required by the contract, their duty to perform these obligations ceases to exist.
In general, the effect of the termination of a contract is to discharge the parties from their
unperformed obligations under the contract. However, termination does not affect liabilities
of the parties for breaches of the contract that occurred prior to the contract being
terminated. And, despite the fact that future obligations to perform under the contract terms
have been extinguished, if appropriate, the parties remain entitled to pursue claims for
damages under the common law and as provided by any termination provisions that may be
contained within the contract.

How Contracts Terminate

There are 4 main ways contracts terminate or can be terminated (there is a difference):

 by performance: The contract runs its course, and the contract is performed

 by agreement: The parties agree to end the contract by agreement, with another
contract
 by breach of contract: The innocent party has a right of termination for breach
of contract, when party does not deliver what was promised and is in repudiatory breach, or
another agreed standard of breach 
 by the law of frustration: the underlying circumstances of contract change,
which material alter the performance requirements of the contract
They're only the general grounds in law that are available in all contracts: they can be
qualified or excluded by the agreement itself.

What Is a Breach of Contract?

A breach of contract is a violation of any of the agreed-upon terms and conditions of a
binding contract. The breach could be anything from a late payment to a more serious
violation such as the failure to deliver a promised asset.

A contract is binding and will hold weight if taken to court. To successfully claim a breach of
contract, it is imperative to be able to prove that the breach occurred.
Understanding a Breach of Contract
A breach of contract is when one party breaks the terms of an agreement between two or
more parties. This includes when an obligation that is stated in the contract is not completed
on time—you are late with a rent payment, or when it is not fulfilled at all—a tenant vacates
their apartment owing six-months' back rent.

Sometimes the process for dealing with a breach of contract is written in the original
contract. For example, a contract may state that in the event of late payment, the offender
must pay a $25 fee along with the missed payment. If the consequences for a specific
violation are not included in the contract, then the parties involved may settle the situation
among themselves, which could lead to a new contract, adjudication, or another type of
resolution.