Contract

A legally binding agreement. The agreement arises as a result of an *offer and *acceptance, but a number of other requirements must be satisfied for an agreement to be legally binding. There must be *consideration (unless the con­ tract is by *deed); the parties must have an intention to create legal relations; the parties must have the capacity to contract (i.e. they must be competent to enter a legal obligation. by not being a minor, mentally disordered. or drunk);  the agree­ment must comply with any formal legal requirements; the agreement must be legal (see ILLEGAL CONTRACT), and the agree­ment must not be rendered void either by some common-law or statutory rule or by some inherent defect. In general. no particular formality is required for the creation of a valid con­ tract. It may be oral, written, partly oral and partly written, or even implied from conduct. However. certain contracts are valid only if made by deed (e.g. transfers of shares in statutory *companies, trans­fers of shares in British ships, legal *mortgages, certain types of *lease) or in writing (e.g. *hire-purchase agreements, *bills of exchange, promissory notes, contracts for the sale of land made after 21 September 1989). and certain others. though valid can only be enforced if evi­denced in writing (e.g. guarantees, con­ tracts for the sale of land made before 21 September 1989). See also SERVICE CONTRACT. Certain contracts. though valid may be liable to be set aside by one of the parties on such grounds as *misrepresentation or the exercise of undue influence. See also AFFIRMATION OF CONTRACT; BREACH OF CONTRACT.