Contracts

The essence of commercial relationships is that agreements are made whereby parties promise to provide goods or services to each other, usually in return for monetary payment, reward or consideration. It is, therefore, necessary to ascertain to what extent such agreements and promises will be considered legally binding. Those agreements which do give rise to rights and liabilities are known as ‘contracts’. One of the basic rules of English Common Law is that only contracts may be considered as being legally binding. In other words, although the parties may have an agreement which in the normal course of commercial life would be carried out, this agreement may not necessarily lead to legal liability should one party deviate from the agreement. Without such legal liability it is unlikely that the ‘injured’ party will be able to seek any redress from the other party’s breach of agreement. Thus, it is essential that the student understands the difference between a contract and a mere agreement. Contracts are ‘legally binding agreements’.