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The Basis of an Agreement: Understanding the Key Elements

When entering into any formal agreement, it is important to understand the basis of the agreement. The basis of an agreement refers to the key elements that make up a legally binding contract or agreement. These key elements include offer, acceptance, consideration, and intention to create legal relations.


An offer is a proposal made by one party to another. It can be a verbal or written communication that proposes a specific set of terms or conditions. It is important to note that an offer must be communicated with the intention of creating a legally binding agreement.


Once an offer has been made, the other party must accept the offer in order for it to become a legally binding contract. Acceptance can be in the form of a verbal or written communication. However, it must be communicated clearly and unambiguously to indicate that the other party has agreed to the terms and conditions of the offer.


Consideration refers to something of value that is exchanged between the two parties. It can be a promise, money, goods or services. Consideration is essential to the validity of a contract because it indicates that both parties are providing something of value in exchange for what they will receive.

Intention to create legal relations:

The final key element of a legally binding agreement is the intention to create legal relations. It is important to establish that both parties understood the nature of the agreement and intended for it to be legally binding. This means that both parties must have the capacity to enter into the agreement and must agree to act in good faith.


To conclude, the basis of an agreement is essential to any formal contract or agreement. The key elements of offer, acceptance, consideration, and intention to create legal relations are essential to ensure that the agreement is legally binding. It is important to seek legal advice when drafting and entering into any formal agreement to ensure that all key elements are present and understood by all parties involved. By understanding the basis of an agreement, you can ensure that your contracts are legally binding and enforceable.