A contract is an agreement among two or more individuals or entities (e.g., corporations, partnerships, LLCs) to do something or to refrain from doing something. For a contract to be valid, it must have a legitimate purpose. It cannot be illegal. For instance, an agreement among competitors to keep their prices high would be a violation of the antitrust laws, and would not be enforceable.
A contract must consist of an offer and an acceptance of the offer. A response to an offer which proposes to delete, add to or otherwise change the terms of the offer is not an acceptance; rather, it is counter-offer. Only once the parties agree on all terms of the deal is a contract formed.
The contract must also be supported by “consideration.” Consideration is more commonly referred to as a “quit pro-quo.” For instance, A’s “agreement” to give his car to B is not a valid contract, unless B agrees to do something for A, such as paying A a specified price for the car.
Generally speaking, contracts may be oral or in writing. However, some contracts, such as contracts for the purchase or sale of real property, or contracts which cannot be performed by both sides within one year, must be in writing to be enforceable.
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