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What is the Legal Definition of a Contract?

Updated: May 13, 2022

In Australia, a contract is a legally binding agreement between two or more people or businesses. For a contract to be legally binding, it must include several ingredients. Those ingredients are:

  1. Offer: there must be an offer from one person to the other

  2. Acceptance: the party receiving the offer has accepted the offer

  3. Consideration: something of value has exchanged between the parties to the contract

  4. Intention: there is evidence that all parties intended the agreement to be legally binding

  5. Certainty: the terms of the contract are clear and certain

  6. Capacity: each party has sufficient capacity to enter into the contract

  7. Formalities: as an additional ingredient, some contracts must also comply with formalities outlined in legislation

Legal Definition of a Contract
Legal Definition of a Contract

Author: Farrah Motley, Legal Principal of Prosper Law, an Australian Commercial Law Firm.

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