A contract is a legally binding agreement that defines and governs the rights and duties between or among its parties. A contract is legally enforceable when it meets the requirements of applicable law. A contract typically involves the exchange of goods, services, money, or a promise of any of those. In the event of a breach of contract, the injured party may seek judicial remedies such as damages or cancellation.
In the Anglo-American common law, formation of a contract generally requires an offer, acceptance, consideration, and mutual intent to be bound. Each party must be those who are binding by the contract. Although most oral contracts are binding, some types of contracts may require formalities such as being in writing or by deed.
In the civil law tradition, contract law is a branch of the law of obligations.
Each country recognized by private international law has its own national system of law to govern contracts. Although systems of contract law might have similarities, they may contain significant differences. Accordingly, many contracts contain a choice of law clause and a jurisdiction clause. These provisions set the laws of the country which will govern the contract, and the country or other forum in which disputes will be resolved, respectively. Failing express agreement on such matters in the contract itself, countries have rules to determine the law governing the contract and the jurisdiction for disputes. For example, European Member States apply Article 4 of the Rome I Regulation to decide the law governing the contract, and the Brussels I Regulation to decide jurisdiction.
Electronic contracts.
Entry into contracts online has become common. Many jurisdictions have passed e-signature laws that have made the electronic contract and signature as legally valid as a paper contract.
In India, E-contracts are governed by the Indian Contract Act (1872), according to which certain conditions need to be fulfilled while formulating a valid contract. Certain sections in the Information Technology Act (2000) also provide for validity of online contracts.
In some U.S. states, email exchanges have become binding contracts. New York courts in 2016 held that the principles of real estate contracts apply equally to electronic communications and electronic signatures, so long as “its contents and subscription meet all requirements of the governing statute” and pursuant to the Electronic Signatures and Records Act (ESRA).
Intention to be legally bound.
In commercial agreements it is presumed that parties intend to be legally bound unless the parties expressly state the opposite as in a heads of agreement document. For example, in Rose & Frank Co v JR Crompton & Bros Ltd, an agreement between two business parties was not enforced because an "honor clause" in the document stated "this is not a commercial or legal agreement, but is only a statement of the intention of the parties".
In contrast, domestic and social agreements such as those between children and parents are typically unenforceable on the basis of public policy. For example, in the English case Balfour v Balfour a husband agreed to give his wife £30 a month while he was away from home, but the court refused to enforce the agreement when the husband stopped paying. In contrast, in Merritt v Merritt the court enforced an agreement between an estranged couple because the circumstances suggested their agreement was intended to have legal consequences.
