Definition: A binding contract is a legal agreement that can be enforced by a court of law in the event that any of the parties breaches a stipulated clause. It is a legal obligation acquired by one or more individuals or companies that can be submitted to the judiciary system for review in case of a violation of the agreed-upon elements.
What Does Binding Contract Mean?
In order for these contracts to be considered binding they have to meet certain criteria. For example, a binding agreement must be signed by someone with enough legal capacity to commit himself or a third party involved.
On the other hand, the contract has to be properly aligned with the law of the land, which is the legal framework of the country where the contract is signed at. Additionally, in order for a contract to be considered binding it doesn’t have to be necessarily written but it should be acknowledged by both parties that an agreement is taking place.
Implicit contracts can be considered binding and they can be enforced by a court if there are enough facts to support that a legal contract took place. A court of law has the responsibility to enforce binding contracts and to punish any of the parties that breaches the clauses contained in them.
Example
Catso Co., a big network of supermarkets located in the U.S. and PC Solutions LLC recently signed an agreement where PC Solutions committed itself to supply all the laptops, desktop computers and printers required by Catso in all its facilities. This includes that PC Solutions guarantees that all users within the company have an available computer at all times. PC Solutions will keep a backup of new computers that will be available immediately for Catso if one of theirs fails.
A few days ago a virus attacked Catso’s network and completely damaged 10 of its computers. According to its agreement with PC Solutions they had to supply 10 additional PCs immediately, but they fail to do so in 2 days and this was an obvious breach in their contract. Catso pointed this to the supervisors at PC Solutions and they quickly resolved the matter to avoid a court action from Catso. Such action will be very harmful for PC Solutions since the contract is a binding one due to its nature.
