Instances of lacking capacity are if the signing parties are considered minors, under the influence of drugs or alcohol, or if the contract was signed under threats. If it is found that a party lacks the capacity, the contract will be void. Legal capacity is when the parties indicate that they understand the contract's obligations, terms, and consequences before they sign. That’s why only parties that can demonstrate legal capacity before they sign enter a new contract. CapacityĬontracts can be daunting, especially when signing on behalf of a company. Although, a one-off or recurring payment is classed as a consideration. It's important to remember that there doesn’t need to be an exchange of money for contractual consideration to be valid. Property, services, and insurance are all considered contractual considerations. For contractual purposes, contracts are not considered binding unless something of value is exchanged between the parties. The purpose of a contract is based on what it provides. If a party signs the contract under duress or can prove fraud, misinterpretation or undue influence, the contract is rendered invalid. If awareness cannot be established, then the contract can be voided. Sometimes termed a meeting of the minds, the parties must come together, recognise that the contract exists and agree to be bound by the contractual obligations. Awarenessįor a contract to be legally binding, both parties must know that they are entering into a new agreement. Any conditional acceptance or the negotiation of additional terms is a counter-offer, which is seen as a rejection of the original agreement as it starts the process again. The definition of contract acceptance has long been disputed, but formally, a contract is considered to have been accepted when it has been signed. The second element of a contract is acceptance. A contract offer does not exist until the requesting party has received it. For example, Party A agrees to pay £500pm to Party B for renting office space. This results in ‘the offer’, which defines the responsibilities of each party. The other party has the resources to fulfil it for an exchange in value. One party requires something from the other.
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