Basics of Contractual Agreements

A contractual agreement is a legally binding agreement between two or more parties.
It often refers to a document which details the terms and conditions of a transaction or a certain relationship.
The essential ingredients required to form a contract include offer, acceptance, consideration and intention to create legal relations.
All the parties in a contract must have legal capacity, meaning they have to be of legal age and sound mind.

Types of Contractual Agreements

Written contracts: These involves both parties signing a written document that outlines the terms and conditions of the agreement.
Oral contracts: These are verbal agreements which are also legally binding, but can be difficult to enforce due to lack of physical evidence.
Implied contracts: These are formed through the behaviour or actions of the parties involved, rather than written or spoken words.

Offer: One party proposes the terms and conditions of the agreement to the other parties.
Acceptance: The other party consents to the terms and conditions stipulated in the offer.
Consideration: This is a value promised to convince a party to agree to the contract. It could be money, a service, or a promise to perform certain actions.
Legal Purpose: The contract must be for a lawful purpose. Contracts for illegal activities are not enforceable.

They outline expectations for all parties involved and define the roles and responsibilities of each.
They create a legally binding commitment, meaning any party that breaches the contract can be held accountable in a court of law.
They provide a reference point if there are disputes about the terms of the agreement.
Ensuring contractual agreements are adhered to is essential for successful procurement and supply in business.

Risk of non-performance: Sometimes, one party might not fulfill their obligations, which can result in losses for the other party.
Risk of misunderstanding: The terms of a contract might be interpreted differently by the different parties, causing confusion and possible conflict.
Remedies: In case of breach, often the injured party can seek remedies that include damages (compensation), specific performance (asking the court to force the party to fulfil their part of the deal), or cancellation of the contract.