Contract

A contract is a written or verbal agreement describing certain obligations binding two or more parties.

For a contract to be valid, it must meet certain criteria. There must be a meeting of the minds between the parties, meaning that they must have all generally understood what was being agreed. There must be consideration given by all the parties, meaning that every party is exchanging something of value as part of the transaction.

Contrary to common wisdom, a contract can still be binding and as legally valid as a written contract. Even, if it is not in writing.

A spoken contract is often called an "oral contract", not a "verbal contract".

A "verbal contract" is simply a contract that uses words.

All "oral contracts" and written contracts are "verbal contracts".

Contracts that are created without the use of words are called "non-verbal, non-oral contracts".

Courts in the United States have generally ruled that if the parties have a meeting of the minds and act as though there was a formal, written and signed contract then a contract exists. Most jurisdictions require a signed writing for certain kinds of contracts (like real estate transactions); such requirements are referred to as the statute of frauds.

Further, the existence of a written contract does not necessarily prove its enforcability or validity. A contract can be deemed unenforceable if it requires a party to undertake an illegal act, if it was signed under duress or while intoxicated, if the disparity in knowledge between the parties is extreme and the weaker party was given onerous terms, etc.

In the United States the validity of contracts is protected directly in the Constitution. The rules by which contracts are judged are codified by each state in a commercial code, most of which are based on the Uniform Commercial Code (UCC).

Many jurisdictions enforce a difference between unilateral contracts and bilateral contracts. The latter is when two parties agree sign a contract (such as if A buys a house from B) and the former is when a contract is open to anyboy (for example: shop A publiclly advertises a special offer). In Britain, it was decided in //Carhill// that a unilateral contract has the same requirements as a bilateral contract but applies to a far wider group of people (whoever is capable of entering in to the contract).

See also: Good faith, Negotiation, Remedy.

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