A contract is essentially an agreement between parties that creates obligations to do, or not do, certain things and is legally enforceable. For a contract to be valid, and enforceable, several elements must be properly met. In the simplest sense, contracts are agreements that "create obligations enforceable by law." A valid contract begins with a mutual agreement between two parties. The parties demonstrate their mutual assent to agreement through offer and acceptance and a meeting of the minds.
A contract also requires consideration to be valid. Under the law, consideration is a benefit or a detriment that fairly induces the party to enter the contract. In other words, the parties agree to perform an act they are not otherwise legally required to perform or refrain from performing an act they are otherwise legally entitled to perform.
In addition, the parties to the contract must have the capacity to enter the contract and the subject matter of the contract must be legal to be valid. Provided that the contract is valid, it is considered a promise that the law will enforce. Each party to a contract has a duty to perform the terms of the contract.
If promises to perform are not honored, and contract terms are violated, a breach of contract may have occurred. A variety of remedies may be available when a party has breached a contract, failing to fulfill its end of the bargain, and a contract dispute arises. Damages may include enforced performance of the contract or damages that result from a breach of the contract.
In business, businesspeople enter a variety of contracts often as part of conducting business. There are multiple aspects to a valid contract and some contracts, for instance, must be in writing to be valid. Because of this, it is important to understand the elements of a valid contract and to be prepared to handle a contract dispute should the need arise.
Source: Cornell University Law School Legal Information Institute, "Contract," Accessed August 11, 2014