A contract is a legally enforceable agreement between parties, which contains mutual rights and obligations.

In order for a contract to be binding between parties, the formalities of a contract must be met. These are as follows:

• The contract must be lawful, and the contracting parties must have capacity to enter into a contract. Capacity refers to the ability of a party to understand the terms of the contract and the consequences thereof. The parties must also be acting freely and voluntarily free from any form of duress.
• There must be a consensus or a “meeting of the minds” between the parties in respect of all material terms of the contract. The parties must have intended to enter into the contract and be bound by its terms.
• There must be a clear and certain offer and an unconditional and unequivocal acceptance.
• There must be consideration -the parties must receive some value for their obligations.
• There must be certainty - the terms must be definite and the terms must be capable of performance. The agreement must comply with the specific formalities depending on the nature of the agreement and any applicable law.

A common misconception is that verbal contracts are invalid. Provided that a verbal contract meets the above requirements it is generally binding. The difficulty with verbal contracts is that in a dispute, the party seeking enforcement, must prove the existence and validity of the contract and depending on the circumstances it may not be an easy task.

It is prudent, where possible, that contracts between parties be reduced to writing, and in doing so it is important to ensure that the essential terms of the contract are present. Certain contracts require specific formalities without which the contract is unenforceable, these include inter alia, the Purchase and Sale of Land, the conclusion of an antenuptial contract,  long term lease agreements registered in the deeds office and suretyship agreements.

Where a party fails to perform its obligations in terms of the contract, that party is said to be in breach. A party in breach may be allowed an opportunity to remedy their breach, however a material breach may lead to a cancellation of the contract and a claim for restitution or damages.

Whilst a party to a verbal agreement may deny the conclusion of the contract, a signatory to a written contract may not escape the consequences of a contract claiming that they did not understand, or they were not aware of the terms of the contract when they signed. The cautionary Latin maxim caveat subscriptor directly translates as “let the signatory beware”.  if you sign a contract you are deemed to have read and understood the terms of the contract and your signature is confirmation of your acceptance and intention to be bound. However, a party is not bound to an agreement where there has been a misrepresentation by the other party.

A misrepresentation in the context of a contract is the deliberate making of false statements which are material, and which induced the other party into concluding the contract. A misrepresentation by a party renders an agreement void or voidable at the instance of the innocent party.

Given the wealth of readily available resources, it may be tempting to draft your own contracts in an attempt to avoid legal bills. The legal doctrine of the contra proferentum rule dictates that “in the interpretation of a contract any ambiguity in the contract will be construed against the party who drafted the contract”. Therefore, the party who drafts the contract will be at a disadvantage, if in a dispute, the terms of the contract are ambiguous.

“It is impossible to unsign a contract so do your thinking before you sign”- Warren Buffet

The benefit of an experienced attorney drafting or vetting the terms of the contract will offer peace of mind and save you the cost of lengthy and expensive litigation in the future.