What is a contract?

Contributed by Ian Macdonald and Su Mahalingham and current to 1 September 2005

A contract is a legally binding agreement between two or more parties. In other words, it is just a bargain or a deal.
To be legally binding and therefore enforceable by the courts an agreement must have all of the following elements:

• Agreement between the parties;
• Intention to create legal relations;
• Consideration (that is, the exchange, or payment for the promise made);
• Legal capacity of the parties to enter into an agreement;
• Genuine consent of the parties; and
• Legality of the agreement.

An agreement that omits one or more of the elements listed above will not be a contract and will not be legally binding.