Something of value, such as cash, services or goods (or the promise to exchange it), must be exchanged for something else of value. A contract is a legally binding document between two or more parties that defines and governs the rights, duties and responsibilities of all parties involved in an agreement. It becomes legally binding when all parties sign the agreement. It may involve an exchange of goods or services and will provide legal remedies to any party affected by a breach of contract.
Since a contract is legally binding, all parties must abide by the terms and do what the contract says they must comply with. We'll explain what makes a contract legally binding, including the necessary elements, what to do if something is missing from a contract, if an invalid contract can be fixed, and more. Firms are legally recognized as each party's agreement to the terms of the contract and are bound by the obligations of the contract. A contract creates legal obligations between two or more “parties” (individuals, companies, institutions, etc.) involved in the contract.
However, a contract does not have to specifically state this, because the intention to create legal relationships is assumed when entering into a contract. For example, a minor who signs settlement agreements can have that contract void if he can prove that he was not legally an adult at the time it was signed. In general, a contract that was made with someone who did not have contractual capacity is not considered a binding contract, nor is it considered a contract that has not received mutual consent. If the parties think that the contract has been broken and want to challenge the legality of their agreement, they may need to take the case to court, where a judge will decide if there has been a breach of contract based on certain criteria.
All parties involved in the contract must realize that they are entering into a legally binding agreement and must declare that they will follow the contract or risk being brought to court. At that time, and the law is clear about it, a legal contract exists only when one party makes an offer and the other party accepts all the terms of that offer. For a contract not to be legally enforceable, all parties must agree that the contract is not legally bound. For example, if you hire a vendor to provide you with X and Y, but decide that you need to add Z to the final delivery, the supplier can create a binding contract by doing Z, something you can't question or avoid if you change your mind.
However, legal action should not be taken lightly, especially since contract law can be complex and time-consuming. Please note that Rocket Lawyer is not a lawyer referral service, accountant referral service, accounting firm, or law firm, it does not provide legal or tax advice or representation (except in certain jurisdictions) and is not intended to replace an attorney, accountant, accounting firm or law firm of lawyers. While an invalid (or void) contract is one that could never be enforced to begin with, a voidable contract is enforceable unless a party actively challenges it and demonstrates that it has one or more legal problems. A contract that was created by force or coercion is not considered legally binding, nor is one that involves illegal activity, such as a contract to sell illegal drugs.