In order for an agreement to become a legally binding contract, it has to satisfy several requirements. These are:
- The agreement must be such that it intends to create legal relations and is capable to affect legal relations. In other words there must be a valid offer made by the promisor and a valid acceptance of the offer by the promise.
- All parties to the agreement must have full contractual capacity. For example, a child does not have the capacity nor is someone who is mentally ill.
- In cases where special formalities are required by law to be part of agreement, these special formalities must be fully complied with.
- Any agreement that is to become a binding contact must include a “consideration”.
- The subject matter of the agreement must not be against the law.