What is a contract? In the simplest of terms, the essence of a contract is an agreement between parties. But, to make things more complicated, an agreement alone is not necessarily a contract. In order for a contract to be created parties must not only agree to something, they must also agree to do (or not do) something for each other.
For example, if you and I agree that you will paint my house for $100, we have entered into a contract. However, if you and I ‘agree’ that I’ll give you $50 for your birthday, we do not have a contract. Why? It all comes down to the “consideration”. When we agreed that I’d give you $50 for your birthday, you didn’t promise anything in return. In the house painting example (the agreement that does form the basis of a contract) you and I have both promised to do something (the consideration): I promised to pay you $100, and you promised to paint my house. Therefore, we both have agreed to do something for each other, and as such, we have a contract!
Please note- the information on this website does not constitute legal advice. Consult an attorney before you draft or enter your next contract.