From buying shares to starting a new job, there are several important agreements which require legally binding contracts to protect the interests of both parties. These contracts will equip you with the right to take the other party to court if they do not adhere to their side of the agreement and will also protect you should the other party contest your actions in any shape or form.
Core Structure of a Contract
All contracts are comprised of six core sections which are listed as follows:
- Offer
This introductory section states the offer of a job or service from one party to another. - Acceptance
This section covers the acceptance of the job or service in question by the other parties involved. - Consideration
This section outlines the amount of money or item of interest that each party gives and receives to one another in return for the job or service in question. - Capacity
This section certifies the capacity of both parties to enter into a contract in terms of their age and sound state of mind. - Intention
This section acts as the agreement between all the parties involved to enter into a legally binding contract with one another. - Object of the contract
This concluding section outlines that the terms and conditions of the contract in question are capable of being carried out within the boundaries of the laws.
This written agreement will be signed and dated by all the parties involved, thereby making it legally binding.
Contract Review Legal Jargon
To help debunk tricky contract law terminology, here are our clear and concise definitions of some of the most common legal terms that are utilised within contracts:
- Asset
The term used to describe the money, estate (property), vehicles or other items which are of importance within the terms of a contract. - Automatic renewal clause
An agreement within a contract wherein its terms and conditions are agreed to be renewed after the current term of the contract expires. This agreement can be discontinued if one of the parties involved gives notice within the appropriate course of time. - Breach of contract
A legal cause of action wherein an agreement is not honoured by one or more of the parties involved. A contract may often stipulate fines or charges in the event that one party causes a ‘breach of contract’. - Event of default
An action that causes one of the parties involved to demand a full repayment of an outstanding balance before it was originally due, if they can provide a legitimate reason for doing so. - Indemnity clause
An agreement within a contract wherein one or more parties involved must compensate the other for any liability, harm or loss that may occur as a result of the contract. - Joint/several liability
Where responsibility to pay a debt or carry out a service is shared by two or more parties. - Mediation
The process of resolving disputes wherein a third independent party assists. If this process fails to result in an amicable resolution then court proceedings are initiated. - Party/parties
The term used to describe the people involved within a contract. The person who instigated the contract is often called the ‘applicant’ and the other party or parties involved are referred to as the ‘respondents’. - Service
The term used to describe the delivery of legal documents by person, post or email. - Termination for cause
A provision that can be included within a contract which allows a party to completely or partially end the agreement outlined within the contract for legitimate reasons. - Warranty
A promise or guarantee from one party to another that certain facts are true or that specific conditions of the contract will be met.
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