Contractual Agreement Explained

Standardized Legal Documents Contractual Agreement Explained

Create a Contractual Agreement Without Brain Contractions

Everyone has to create a contractual agreement at some point, whether for renting a property, selling a product, or making a business deal. It may seem that writing contracts is too difficult for a layman, but that doesn’t have to be the case!

You don’t always have to hire an expensive lawyer to draw up an agreement or resort to using dodgy contract templates. DoNotPay will teach you all about contracts and help you create a professional contractual agreement in a few clicks!

What Are Contractual Agreements?

Contractual agreements are legally-binding documents between two or more parties that involve an exchange of value. The purpose of a contract is to define mutual legal obligations between signees and determine the consequences of breaching the agreement. 

An individual or business can create a specific contract for any transaction. Contracts can be based on:

  • Sale
  • Property ownership transfer
  • The performance or specific service

What Makes a Contractual Agreement Legally Binding?

The main purpose of a contractual agreement is to define the terms according to the law. If two parties create a valid document, the court is required to enforce it. 

A legally binding contract includes specific elements, such as:

  • Offer and acceptance—An offer is the expression of intent to exchange something of value with the other party. The acceptance of that offer creates the basis for making a contractual agreement
  • ConsiderationThis term refers to the benefit that each party will gain from entering the agreement. It can be money, an object, service, or anything else of value
  • MutualityIt refers to both parties’ intention to create a valid agreement
  • LegalityA legally valid contract mustn’t include unlawful consideration. An example of that is promising to do something against the law, such as commit a crime
  • Capacity—Capacity refers to a person’s legal ability to enter the agreement. For example, a minor isn’t considered legally capable of signing a contract

Contracts that meet the above criteria are enforceable even if they are not equally fair to both parties. Specific factors making a contractual agreement void include:

  • Fraud
  • Duress
  • Influence

Various Types of Contractual Agreements

Contracts can come in many forms and have various purposes. Some of the main contractual agreement types are:

  • Expressed and implied contracts—The terms of the former are expressed openly, and the latter is implied by actions, facts, or circumstances  
  • Unilateral and bilateral agreements—Unilateral agreements involve only one party providing something of value, while in bilateral both parties agree to exchange items or services  
  • Unconscionable contracts—They are considered to give an unfair advantage to one party
  • Adhesion contracts—A contract created by a person with bigger bargaining power. The other party can only accept or decline to enter the agreement
  • Aleatory contracts—These contracts have to be triggered by an outside event. An example of such a contract is an insurance policy
  • Option contracts—They allow a signee to enter a contract with another party after a specific time. An example of that is a real estate contract
  • Lump-sum agreements—A contract where a buyer and seller agree on a fixed price for a project 

Crucial Sections of a Contractual Agreement

Contracts can vary in length, language formality, and many other characteristics. While the content may differ, all contractual agreements need to have a specific structure. 

Here is an overview of every contract’s main sections:

Contract Section


PreambleThis section states:

  • Name of the agreement
  • Date of the execution
  • Names of the involved parties
RecitalThe recital specifies the agreement’s background. It states both parties’ understanding of the situation and intent for entering the agreement 
AgreementThis section outlines the exchange of promises between signees
DefinitionIt explains the contract terms in detail 


This part sets the foundation for other contractual terms that support the exchange of value, including:

  • Rights of each party
  • Relevant dates
  • Prices
  • Quantities
  • Payment terms and due dates
  • Taxes
  • Interests
  • Late fees
Reps and warrantiesThis section contains assurances from one or both parties that specific facts in the agreement are true
Covenants and rightsThe covenant section contains a promise that certain actions will be taken before the agreement takes effect
ConditionsThis section determines what actions must take place before the other party starts to perform its contractual obligations
Provisions and remediesYou can use this section to outline the consequences of the agreement failure, including remedies and damages for breaching the agreement
General provisionsGeneral provisions refer to governance or management of the contract, including the governing law, disclaimers, and limitations on liability
SignaturesBoth parties must provide signatures in this section

DoNotPay Can Help You Create Contractual Agreements

You can ditch expensive lawyers and unreliable contract templates. You don’t even have to write a contract yourself. DoNotPay can create numerous legal documents on your behalf! After you provide crucial information, we will generate a professional, comprehensive legal document that every court will accept!

To get your tailor-made contractual agreement, you should:

  1. Open DoNotPay 
  2. Type in the name of the document you need
  3. Answer our chatbot’s questions
  4. Download your personalized contract

Some contractual agreements require a notary certification. Fear not because our app enables you to schedule an appointment with an online notary and even fax the document to the other party!

We can generate numerous personalized contracts at your request. Access our app and pick the one you need from the table below:

Business and Real Estate DocumentsMiscellaneous

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