In the term contract agreement', the word 'contract' means a legally binding obligation, that is created between two parties and is or should be honored by the parties. On the other hand, the term 'agreement' simply means the piece of paper on which the contract and its terms and conditions are written down.
A contract is an agreement that is legally binding once accepted and is backed up by the concept of consideration. It can be in both forms, either written or oral. Its consideration basically makes it legally binding.
Looking at the different systems of corporate law, that are followed and established throughout the world, the word 'contract' means a legally binding document. On the other hand, an agreement does not have to be legally binding when it is not backed up by consideration.
A famous case Balfour vs. Balfour, that is studied by everyone in the corporate law, draws the distinguishing line between a legally binding contract and a common or domestic arrangement. In this case, a husband who worked overseas, had made an arrangement to send his wife a monthly allowance.
However, when he discovered that his wife had been unfaithful to him, he stopped the allowance. The wife filed a case against her own husband in response. The courts observed that since this was a domestic arrangement between the husband and wife, the husband was not legally obliged to pay the amount, as it was not a contract.
It ruled that it was not binding, because the consideration was absent from the arrangement. However, it must be noted, that contract agreements can be signed on a domestic as well as a corporate level.
How to Write a Legal Contract?
The first step is negotiation. During the process of negotiation, the goods and services that are to be exchanged for the consideration, are decided. When you want to write contract agreements, it is very important that all parties must be well-informed and aware of the goods and services that are to be exchanged for consideration, during their honoring.
Thus, the step of negotiation is used to establish the ratio and proportion between the amount of goods or services that are to be traded.
Phrasing the Elements of the Contract
It is extremely essential to know how to phrase the contact agreement. The phrasing must be kept simple and must also be straight forward. The following are the most important elements that should be included.
- Existence of more than one party
- Goods or services, or any item or property that is to be traded in return of the consideration
- Legality of all terms and conditions
- Time period or maturity, or the date of execution
- Acceptance of all the involved parties, in the signature and seals
Penalty and Extension
Sometimes, you need to include the clause related to the extension of the time period and also the penalty or compensation, that is to be paid by the party who breaches the contract.
In some nations, the contracts are to be authenticated and legalized, by paying a lawyer or notary to legalize them. On the other hand, you also need to follow some different set of rules, when you write employment contracts. Before you write one, make sure that you have assessed the agreement well and you are aware of all the terms and conditions.