theory of contracts

The theory of contracts is a set of principles that governs how agreements between parties are formed and enforced. A contract typically requires an offer, acceptance, consideration (something of value exchanged), mutual intention to create a legal relationship, and legality of purpose. When these elements are present, the contract is binding, meaning that both parties must fulfill their obligations. If one party fails to do so, it may constitute a breach, allowing the other party to seek remedies such as compensation or enforcement of the contract. Essentially, contracts help ensure that promises made between individuals or entities are respected.