Contract Law components examples
Contract law consists of offer & acceptance, Consideration, Intention to create legal relations, capacity, and formalities. Describe an example of each of these components and why it is important.
The offer and acceptance part of contract law is one of the most important stages of the process to get right. This stage being completed successfully ensures both parties involved have a clear understanding of expectations and deliverables. If the two parties are not on the same page, it must be figured out before anything gets signed or before any work begins to avoid any serious misunderstandings with legal repercussions.
Intention to create legal relations essentially means that both parties are agreeing to enter a legally binding contract. This is obviously important as intent to enter a legally binding contract means both parties are going to take the contract seriously, as it will be a legally enforceable contract. A contract made without intent to be legally bound is little more than just a promise, and promises are not enforceable in law. For example, if in a contract one party has fulfilled their duties but the other party has neglected to do anything, there is no way to actually enforce the other party to fulfill their part of the agreement, and there are no legal repercussions. There can be all sorts of business crises that can arise from this, and realistically it becomes unfair for one side. It is very important to have intent to be legally bound when creating a contract so that both parties can be protected and you can be assured that each party understands the terms of the agreement.
As mentioned earlier by @njq3 the offer and acceptance portion of a contract is the binding agreement between two parties based upon the written contract. The offer refers to the party proposing the contract and the acceptance refers to the party that approves and agrees with the terms stated in the contract. In this process there can be revisions and changes made until both parties are happy and are willing to agree to all terms and sign. Consideration is something that both parties should take into account for which can basically be defined as what does each party get in return for fulfilling their side of the contract. For example, if the contract states that the party will not get any payment for their services this would be a massive issue and would need to be addressed. The contract should provide gain for both parties involved. Intention to legal create legal relations ensures that both parties are legally bound to the contract and that the contract cannot legally bind either party to engage in illegal activities. For example, if the contract states that the vendors must be kept confidential due to ethical reasons - this would be an issue and would break the intention to create legal relations aspect of the contract. Capacity ensures that all signees of the contract are in an able mind and standing to be able to sign. This means that no party should be held under duress or forced against their will in signing the contract. For example, threatening a party to sign a contract would be illegal. Formalities define whether the contract is written or verbal. There should always be a written contract which ensures that no party can back out on their agreements and all parts of the contract are held up by both parties. An example of a verbal contract could be an agreement to be paid more if the product does better than expected. Although it isn't written, it should be accepted and honored by the side that agrees to pay. This situation though could not necessarily hold up in court as it was not written.
The "Capacity" aspect of contract law basically means that the parties signing to the contract must all have the appropriate 1) authorities, and 2) mental capabilities to take on the responsibility of the agreement. #1 pertains to people signing a contract on behalf of a corporation; an individual employee lacking proper experience or seniority within a company may not be the appropriate representative to sign major agreements that can potentially have large financial consequences for the company. As for #2, someone would lack the necessary capacity if they were a minor, and possibly if they were suffering from severe mental illness or severely intoxicated, as they are not in an appropriate state of mind to agree to a legally binding contract.
Formalities, being the final aspect of contract law is important because it essentially signifies the closing of the contract and solidifies everything else mentioned before it. Everything from offer & acceptance, consideration, intention to create legal relations and capacity is binding by the formalities, which ensures how the contract is sealed, through a verbal agreement or a written one. This is especially important, because in the professional industry, most valid contracts are signed with writing, as issues can rise with verbal contracts. There are ways where verbal contracts can be solidified through possible voice memos, but officially, having a written record of the formalities is what binds the contract. This is especially prevalent, for example, if sometime down the line, either party involved int he contract try to back out of their involvement in the contract. If there is a record of the contract that can ensure the party's involvement, then the other party can hold the ones backing out accountable on legal terms, but with no solid formalities in writing, this is significantly difficult.