Nature of Contracts

A Comprehensive Guide to the Nature of Contracts

Contracts have occupied a significant place in the regular vocabulary of individuals, especially those that are engaged in various forms of business operations. It is usually understood as a form of understanding between two or more persons, by which rights are acquired on the one side to acts or forbearances on the other. Various criteria are required to be fulfilled for transforming an agreement into a contract that includes an offer and an acceptance as well as the promises emanating from these offers and acceptances to the promises that are guided by law garbed in obligation to which the concerned parties are bound. In other words, the groups who enter into contracts enter into a form of legal relationship. The nature of contract refers to a branch of law that determines various situations and circumstances in which promises made by a party to a contract shall be binding on them. It consists of a number of limiting principles but does not lay down the rules and responsibilities enforced by the law. In this comprehensive guide, we will provide you with an understanding of the concept, and at the end of the guide; you will acquire a distinct understanding of the concept. 

What are the essential prerequisites of a valid contract? 

The essence of a contract or the mutual and reciprocal agreement between two parties to certain rules, regulations, and tenets is well-known. However, any valid contract must conform to the following criteria-

• Presence of two parties- The presence of two parties is essential for any contract to be regarded as a ‘valid contract’. The contract receives validation from the groups for whom the contract is being prepared. Therefore, a valid contract must have two parties identified by the contract where one of the parties is expected to make the offer and the other party to accept the same. It is also essential that each party must have a legal recognition, that is, they should be schools, individuals, companies, business partners, or organizations. 
• Agreement- Agreements precede contracts. The contract is initially an agreement when the person to whom the offer is made indicates his acceptance of the same. In other words, an agreement is the foundation of a contract. The only difference between agreement and contract is the former is informal and the latter is formal and has a more legal tone. 
• Consent- Both parties have to agree to the same thing. The parties are called to agree with the details laid down in the contract and it is imperative that parties give their consent to the contract. The contract must be free and genuine for it to be regarded as a ‘valid contract’ and it is not to be obtained through misrepresentation, fraud, undue influence, and mistake. A non-free agreement is void. 
• Legal Relationship- In a contract, it is mandatory that both parties form a legal relationship and bind themselves legally. In other words, agreements between individuals are expected to be legal in nature and not social or domestic in which case the contract is null and void. 
• Contractual Capacity– Here, the parties to the agreement are required to enter into a valid contract.  It defines the capability of an individual who wishes to enter into a contract. As per this, an individual is liable to enter into a contract if he/ she – 
• has reached the age of maturity 
• has a sound mind 
• is not disqualified from law from entering into any form of contractual agreements
• Avoiding any form of unlawful considerations- Here, the consideration of an agreement is unlawful if the agreement is supported by the law, has the capability to defeat the provisions of any law, is fraudulent, can be interpreted to pose injury to any person or property and most importantly, if it is regarded as ‘immoral’. 

• Lawful Considerations- Here, the consideration or objection posed to an agreement is lawful unless it is forbidden by the law or bears the ability to break the provisions of any law, has a fraudulent nature or implies injury to an individual or property. 

Conclusion 

Contracts are significant for facilitating a healthy relationship between individuals in any formalized setting. They help in making relationships more formalized and help in resolving concerning issues and resolving disputes.