Introduction
A contract is a legally enforceable agreement between two or more parties which creates a duty for each party to do something (e.g., to provide goods at a certain price according to a specified schedule) or a duty not to do something (e.g., to divulge an employer's trade secrets or financial status to third parties), (Binder, 2001). If one party fails to act as promised, and the other party has fulfilled the duties under the contract, that party is entitled to legal relief. For example, Company A agrees to pay Company B $16,000 for computer equipment. Company B provides the equipment as required in the contract. Company A admits that the equipment meets the contract specifications but fails to pay within a timely manner. Company B can sue for damages. Generally, the non-breaching party’s remedy for a breach of contract is money damages that will put the non-breaching party in the position that it would have had if the contract had been performed.
A valid contract requires four elements and these are:
a. Mutual agreement – there must be a meeting of the minds between parties. There should be an offer and an acceptance. There should be an agreement to enter into the contract
b. Consideration - meaning that “every party is conferring a benefit on the other party or himself sustaining a recognizable detriment, such as a reduction of the party's alternative courses of action where the party would otherwise be free to act with respect to the subject matter without any limitation” (Wikipedia). This simply means that there should be something given and something received.
c. Legality - The good or service being exchanged must be legal
d. Capacity – both parties should be legally competent to enter into the agreement.
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