A legally binding agreement.

To be a valid contract, an agreement must meet five requirements.

1) All parties must freely agree to the contract. They cannot be under physical or moral duress, deceived by fraud, or agreeing by mistake or misunderstanding.

2) The parties must be legally able to enter into the contract. (For example, minors and people with serious mental impairments may not enter into contracts.)

3) The contract must have a purpose. It must refer to a specific good or service.

4) There must be a consideration given to each party, even if the consideration is of token value only. (For example, selling a house to a relative for $1.)

5) The contract must be prepared in a legally valid way. For example, a contract to sell a property must be written, not verbal.

If an agreement does not meet all of these requirements, it is not a contract and is not legally binding.

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