If you’re starting a new business or entering into a new professional relationship, you’ll likely come across legal contracts. Legal contracts provide the framework for agreements and collaborations in the business and legal worlds.

While legal contracts can be intimidating, understanding the basics can make the process much less daunting. Here’s our beginner’s guide to understanding legal contracts.

What is a legal contract?

A legal contract is a written agreement between two or more parties that outlines the terms and conditions of a specific transaction or relationship. It establishes the rights, obligations, and expectations of each party, and provides a plan for what should happen if the terms are not met.

Contracts can be simple or complex, and can cover a wide range of agreements from employment and services to buying and selling goods.

What are the essential elements of a legal contract?

To be considered legally binding, a contract must include the following:

– Offer: The offer is an invitation to enter into a contract. It must be specific, clear, and detailed. An offer can be made orally or in writing.

– Acceptance: The acceptance is the agreement to the offer. It must be clear and unambiguous. Acceptance can be communicated orally or in writing.

– Consideration: Consideration is the exchange of something of value between the parties. In most business transactions, consideration is money. However, it can also be other forms of compensation, such as services or goods.

– Capacity: Both parties must have the capacity to enter into a contract. This means they must be of legal age, have knowledge of the transaction, and not be under any duress or coercion.

– Intent: Both parties must have the intent to enter into a legally binding agreement.

– Legal purpose: The contract must be entered into for a legal purpose. Contracts that violate the law are not enforceable.

What are the types of legal contracts?

There are several types of legal contracts, including:

– Express Contracts: An express contract is one that is specifically agreed upon by the parties. A written or oral agreement is made, and both parties agree to the terms.

– Implied Contracts: An implied contract is one that is not explicitly stated, but can be inferred from the actions and behaviors of the parties.

– Unilateral Contracts: A unilateral contract is one where one party makes a promise to do something in exchange for the other party’s performance.

– Bilateral Contracts: A bilateral contract is an agreement between two parties where each party promises to perform a specific action.

How to read a legal contract

When you receive a legal contract, it’s essential to read it thoroughly before signing. Here are a few things to look for:

– The parties involved: Make sure all parties involved in the contract are explicitly stated.

– The terms: Ensure that all the terms of the contract are detailed and clear. Be certain that you understand what is required of you.

– The payment: Check the payment terms and ensure you are aware of what forms of payment are acceptable. Make sure you are aware of any payment schedules.

– The remedies: Understand what happens if one of the parties breaches the contract. Ensure that there is a method for addressing any issues.


Legal contracts form the foundation of any business relationship or agreement. While they can be complex, understanding the basics is crucial. Every legal contract should be thoroughly read and reviewed before signing. If you don’t understand a contract, seek legal advice to ensure that you’re not making any mistakes. With education and diligence, you can use legal contracts to build strong and successful business relationships.

By webino