A contract in legal terms is defined as a deliberate agreement between competent parties. This involves a mutual understanding and intention to enter into a binding commitment where each party agrees to specific terms. For a contract to be enforceable, it typically requires that each party involved is legally capable of entering into the agreement, which means they possess the mental capacity to understand and appreciate the obligations and consequences of the contract.
The idea of competence is crucial; it ensures that both parties have the ability to make informed decisions. Additionally, a contract must involve an offer, acceptance, and consideration (something of value exchanged between the parties).
In contrast, a verbal agreement between friends is often too informal to be considered a legally binding contract without the necessary elements. A promise that one party can ignore indicates a lack of commitment and enforceability, which is opposite of what defines a contract. Lastly, an informal understanding lacks the formal structure and clear obligations typically required for a contract to be recognized in a legal context. Thus, the definition captures the essential components of what constitutes a legitimate contract.