Leimberg, Satinsky, Doyle, Jackson, Tools & Techniques of Financial Planning, 7th Edition, Chapter 24
Downes, Goodman, Dictionary of Finance and Investment Terms, 5th Edition
An agreement among two or more parties by which rights or acts are exchanged for lawful consideration. Includes a promise or promises by one or both parties to perform or refrain from performing an act or acts.
Elements of a contract
- Agreement - Must be mutual assent by the parties with an offer by one party and acceptance by another. The mutual assent may be in writing or oral.
- Consideration - Something of value one party gives to another in exchange for a promise or act. Consideration can be in the form of money, commodities or personal services.
- Contractual capacity - The parties must be able to enter into a legally binding agreement. Minors, intoxicated individuals and mentally incompetent individuals are among those deemed to lack capacity to enter into a legally binding contract.
- Legality - An agreement to perform an illegal act or contrary to public policy is not an enforceable contract.
- Legal form - The contract must be in a form required by law or acceptable by law. Contracts are not always required to be in writing, but all contracts involving real estate must be in writing.
Types of contracts
- Express - Parties state the terms of the agreement to which they will be found, usually in writing.
- Implied - Terms of agreement can be reasonably inferred by acts of the parties, even if not expressed in writing or orally.
- Bilateral - All parties exchange promises to perform.
- Unilateral - One party makes a promise in anticipation of some act. There is no reciprocal promise.
- Executed - All parties have completed their promises.
- Executory - Contract only partially performed or totally unperformed by the parties.
- Valid and enforceable - All elements of legal and binding contract present.
- Void - Contract without legal force or effect.
- Voidable - Contact that can be annulled by either party after signing because it is legally defective or allows one party to rescind the contract.
- Unenforceable - A contract that cannot be verified for legal enforcement or fails to meet certain requirements.
TradingBoth forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
Managing WealthFutures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
InvestingA forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
InvestingLearn about Party City Holding's performance as a public company. Investors would have lost much more than the Russell 2000 Index by investing after the IPO.
InvestingLegal fees have never been more expensive. Here are some ways for you to save on legal fees while still getting reliable advice.
TradingLearn how to use this type of investment as an alternative way to participate in the market.
TradingThis article expands on the complex structure of derivatives by explaining how an investor can assess interest rate parity and implement covered interest arbitrage by using a currency forward ...