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Definition of Contract

A contract is an agreement between entities where they agree to perform some action. A contract must have the elements of an offer, an acceptance, a promise to perform, a valuable consideration and the terms and conditions of the commitment. A legally binding contract must clearly state the offer made by one party and accepted by the other. It also must exchange something of value for something else of value including case, services, or goods. Contracts also generally contain performance, terms, conditions, obligations, payment terms, liability, and default or breach of the contract.

Some contracts can be oral or written. Although states have laws which outline what contracts must be in writing. For instance, real estate transactions must be in writing. Parties also must be legally allowed to enter into a contract, for instance they must be a legal adult, not under the influence of alcohol or drugs and mentally competent.

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