There are some legal considerations before a contract can be valid. Firstly both parties must have the legal capacity to enter into the contract. Therefore, there are legal restrictions on the employment of minors, the mentally impaired and other persons who might be incapacitated in terms of their ability to enter into binding Contracts of Employment.
For the contract to be legally binding, it must contain four basic elements. These are:
- An offer
- Acceptance of the offer
- Consideration i.e. the work that the employee does and the payment or reward that he or she receives
- An intention to enter into a legally binding agreement
In any employment contract, employers are best advised to include all of the terms and conditions of the contract in writing so that any ambiguity or uncertainty can be avoided. It is however, a statutory requirement that employers issue to their employees a Written Statement of the Main Terms and Conditions of the Contract of Employment. Contracts, however, can be formed verbally but if this is the case, the statutory written confirmation should follow as soon as possible after the verbal agreement. The traditional way of confirming terms and conditions of employment in their entirety is to issue an Employee Handbook alongside the Written Statement.
Offers of employment are commonly made by way of an offer letter, which may give the outline of some of the main terms and conditions offered. Sometimes offers are conditional upon receiving suitable references, work permits or completing a medical examination.
Once the offer is received, the employee must accept it and this acceptance must be clear and unequivocal.
The consideration under the contract is normally in the form of wages in return for work done. However, where there is no consideration for the work done as in situations where volunteers offer their services, there is unlikely to be a binding employment agreement.
Finally, entry into a legally binding agreement must be based on an intention that this should be the case. For example, in domestic situations where family members offer to do work for other family members, such an intention will rarely exist. The absence of an intention to create a legally binding relationship will cast doubt on the existence of a valid contract