What is a contract

A contract is a legally binding agreement between two or more parties to do something. That means it’s not just a casual promise, but a serious commitment that the law recognizes. So, whether you’re a consumer, entrepreneur, or business owner, contracts play a crucial role in making sure everyone is on the same page and holds up their end of the deal. When entering into a contract make sure to understand how it will terminate because contracts end.

Elements of a contract

The six elements you need to know about contracts are offer and acceptance, mutual agreement, consideration, competent parties, legality of purpose and proper form.

1. Offer and acceptance
2. Mutual agreement 
3. Consideration
4. Competent parties
5. Legality of Purpose 
6. Proper Form

These are the key ingredients for a contract to be legally binding and enforceable. So remember, these are – the ABCs of a solid contract. They are explained here.

How are contracts terminated?

Termination of a contract refers to a situation where the contract that was agreed to or entered into between the parties ends. There are various ways in which a contract can terminate and these are explained below:

1. Agreement- a contract may be terminated by mutual agreement between the parties. That is if two people agree that the contract should end. Then upon such agreement the contract would be terminated. If the contract was in writing it may be best for the mutual agreement to also be written down and signed by both parties to indicate their agreement to the contract ending.
2. Impossibility of performance – if an unforeseen circumstance makes it impossible for the terms of the contract to be fulfilled then the contract would be terminated by impossibility of performance. For instance in an event of a flood that destroys the company’s buildings that had outstanding deliveries, then because the flood was an unforeseen event then the contract will be deemed to be terminated and both parties will be discharged from the contract obligations.
3. Performance- a contract may terminate if the performance is complete. That is if the task which formed the basis of the contract is completed it means there is no longer a need to continue with the contract. In other the words the job will be complete. The contract will then terminate. For instance a contract to hire a gardener to water your plants for the day at a fee. After the plants are watered and he has been paid the contract would have ended.
4. Breach – a breach of contract refers to when one or more of the parties does not perform their responsibilities under the contract. Whether the other party refuses to do the contract after it has been finalised, whether they forget to fulfil their obligations or whether they perform the work in a manner that is not satisfactory to the other party or as agreed to initially. These would render the contract breached.
5. Alteration – if the terms of a contract which the parties agreed to are altered in any way, this can cause the contract to be terminated, especially if the alteration of the terms of the contract are made without the consent of the other party. New additions to a contract just like the first original agreement have to be agreed to by the parties. For instance, if you had entered into a contract with someone to buy a plot for BWP80,000.00 and just before you are about to pay, the seller indicates the new price as BWP200,000.00. That new amount was one which was not agreed to, so that constitutes as an alteration and you will be entitled to cancel the contract as the alteration.
6. Operation of of law – there are some contracts which can be directly affected by law or Acts. Therefore, if the coming into operation of a certain law makes the contract impossible to fulfil then the contract will be deemed to be terminated by operation of law. For instance with regard to imports and exports the contract to import goods which later are banned by a certain country and cannot go into that country. Such a contract for such goods would terminate by operation of law.

Conclusion

A contract is an agreement between two or more people that is legally binding. But like all things contracts do have an end date that is when they terminate. There are various ways in which contracts terminate such as by agreement, by breach and by operation of the law just to mention a few. If you enter into a contract make sure to be ready to fulfil the responsibilities least the contract gets terminated. And if you are wondering whether the recent contract you had entered into has terminated or not, use this article as a guide to help you make that determination and take the necessary steps to protect yourself from being sued for breach of contract or for terminating the contract unilaterally.

Author

Tshegofatso M Seretse (Editor)

Tshegofatso M Seretse (nee Gareegope) LLB, LLM, MBA is the Founder and Editor of Legal Dialog, whose mission is to empower lives through legal education. She is also an admitted Attorney, Conveyancer and Notary Public in the High Court of Botswana who loves the law and believes in legal advocacy. Tshegofatso is also a Published Author, Blogger and legal advocate.

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