A contract is a legally-binding agreement which recognises and governs the rights and duties of the parties to the agreement. A contract is enforceable because it meets the requirements and approval of the law. An agreement involves the exchange of goods, money, or promises of any of those. In the event of breach of contract, the law awards the injured party access to legal remedies such as damages and cancellation. In the Anglo-American common law, formation of a contract requires an offer, consideration, a mutual intent to be bound; each party must have capacity to enter the contract. Although most oral contracts are binding, some types of contracts may require formalities such as being in writing or by deed. In the civil law tradition, contract law is a branch of the law of obligations. At common law, the elements of a contract are offer, intention to create legal relations and legality of both form and content. Not all agreements are contractual, as the parties must be deemed to have an intention to be bound.
A so-called gentlemen's agreement is one, not intended to be enforceable, "binding in honour only". In order for a contract to be formed, the parties must reach mutual assent; this is reached through offer and an acceptance which does not vary the offer's terms, known as the "mirror image rule". An offer is a definite statement of the offeror's willingness to be bound should certain conditions be met. If a purported acceptance does vary the terms of an offer, it is not an acceptance but a counteroffer and, therefore a rejection of the original offer; the Uniform Commercial Code disposes of the mirror image rule in §2-207, although the UCC only governs transactions in goods in the USA. As a court cannot read minds, the intent of the parties is interpreted objectively from the perspective of a reasonable person, as determined in the early English case of Smith v Hughes, it is important to note that where an offer specifies a particular mode of acceptance, only an acceptance communicated via that method will be valid.
Contracts may be unilateral. A bilateral contract is an agreement in which each of the parties to the contract makes a promise or set of promises to each other. For example, in a contract for the sale of a home, the buyer promises to pay the seller $200,000 in exchange for the seller's promise to deliver title to the property; these common contracts take place in the daily flow of commerce transactions, in cases with sophisticated or expensive precedent requirements, which are requirements that must be met for the contract to be fulfilled. Less common are unilateral contracts in which one party makes a promise, but the other side does not promise anything. In these cases, those accepting the offer are not required to communicate their acceptance to the offeror. In a reward contract, for example, a person who has lost a dog could promise a reward if the dog is found, through publication or orally; the payment could be additionally conditioned on the dog being returned alive. Those who learn of the reward are not required to search for the dog, but if someone finds the dog and delivers it, the promisor is required to pay.
In the similar case of advertisements of deals or bargains, a general rule is that these are not contractual offers but an "invitation to treat", but the applicability of this rule is disputed and contains various exceptions. The High Court of Australia stated that the term unilateral contract is "unscientific and misleading". In certain circumstances, an implied contract may be created. A contract is implied in fact if the circumstances imply that parties have reached an agreement though they have not done so expressly. For example, John Smith, a former lawyer may implicitly enter a contract by visiting a doctor and being examined. A contract, implied in law is called a quasi-contract, because it is not in fact a contract. Quantum meruit claims are an example. Where something is advertised in a newspaper or on a poster, the advertisement will not constitute an offer but will instead be an invitation to treat, an indication that one or both parties are prepared to negotiate a deal. An exception arises if the advertisement makes a unilateral promise, such as the offer of a reward, as in the famous case of Carlill v Carbolic Smoke Ball Co, decided in nineteenth-century England.
The company, a pharmaceutical manufacturer, advertised a smoke ball that would, if sniffed "three times daily for two weeks", prevent users from catching the'flu. If the smoke ball failed to prevent'flu, the company promised that they would pay the user £100, adding that they had "deposited £1,000 in the Alliance Bank to show our sincerity in the matter"; when Mrs Carlill sued for the money, the company argued the advert should not be taken as a serious binding offer. Although an invitation to treat cannot be accepted, it should not be ignored, for it may affect the offer. For instance, where an offer is made in response to an invitation to treat, the offer may incorporate the terms of the invitation to treat. If, as in the Boots case, the offer is made by an action without any