What Makes a Legally Binding Contract?

As one of the leading UK legal recruitment and training companies, we ask this question in interviews a lot!

You’d be surprised at some of the answers we receive. It’s literally Law 101, yet many candidates struggle to articulate the core principles.

Whether you’re an aspiring lawyer or a business professional dealing with contracts daily, understanding what constitutes a legally binding agreement is fundamental. So, just for fun – What does make a legally binding contract?

The Key Elements of a Legally Binding Contract

For a contract to be enforceable under English law, it must contain the following essential elements:

1. Offer
   An offer is a clear and definite proposal by one party to another. It must set out the essential terms and demonstrate an intention to be bound once accepted. For example, a supplier offering to sell goods at a specified price constitutes an offer.
2. Acceptance
   Acceptance must be unqualified and communicated to the offeror. If the acceptance introduces new terms, it becomes a counteroffer rather than a binding agreement. Silence generally does not amount to acceptance unless there is a prior course of dealing suggesting otherwise.
3. Consideration
   Under English contract law, consideration is something of value exchanged between the parties. It doesn’t have to be monetary – it could be goods, services, or even a promise to do (or not do) something. The principle of “a peppercorn consideration” demonstrates that courts will not question the adequacy of consideration, only its existence.
4. Intention to Create Legal Relations
   Not every agreement amounts to a legally binding contract. The parties must intend for the agreement to be enforceable in court. Social or domestic agreements (e.g., a promise to meet for coffee) typically lack this intention, whereas commercial agreements usually presume it.
5. Certainty and Capacity
   A contract must be clear and certain in its terms—vague or ambiguous agreements may not be enforceable. Additionally, both parties must have legal capacity, meaning they must be of sound mind and not minors (with limited exceptions).

Can a Contract Be Binding Without a Written Agreement?

Yes! While some contracts (e.g., land sales, guarantees) must be in writing, many legally binding contracts can be verbal or even implied through conduct. However, written contracts provide clarity and reduce the risk of disputes.

Contract Formation

A solid understanding of contract formation is essential for any commercial solicitor or business professional. If you’re ever in an interview and asked What makes a legally binding contract? – make sure you confidently cover these core elements – it’s the foundation of contract law and a question you really should get right!