What is the key characteristic of a legally binding contract?

A legally binding contract fundamentally requires consideration, which refers to something of value that is exchanged between the parties involved. Consideration is essential because it demonstrates that both parties are entering the agreement voluntarily and that there is a mutual exchange that creates the obligation. Without consideration, a contract may be deemed unenforceable, as it indicates that one party is not receiving something of value in return for their promise.

The requirement for a written and signed contract, while beneficial and often necessary for certain types of agreements, is not universally applicable to all contracts. Many oral contracts can be legally binding as long as they meet other essential criteria, including consideration.

The involvement of at least two parties is another important attribute, as contracts typically connect multiple individuals or entities. However, the distinction of consideration remains paramount, as it is the foundation that validates the agreement between those parties.

Finally, while some contracts may need to be created under legal supervision—particularly those involving significant implications or regulated matters—not every legally binding contract needs such oversight. Hence, consideration stands out as the essential element that underpins the legitimacy and enforceability of a contract.