What defines a legally binding agreement?

A legally binding agreement is characterized by a signed document with clear terms because it establishes a mutual understanding and specific obligations between the parties involved. The existence of a written contract provides tangible evidence of the agreement, outlining each party's responsibilities and any conditions that must be met. This clarity is essential in legal contexts, as it helps to prevent misunderstandings and provides a framework for enforcing the agreement if necessary.

In contrast, an informal understanding does not carry the same legal weight and may lead to ambiguity regarding the involved parties' intentions. A commitment that cannot be enforced lacks the elements needed for the legal system to uphold it, typically missing key components or formalities. Additionally, an oral promise may be difficult to prove and enforce, especially if there is no documentation or witnesses to support it. Thus, a signed document with clear terms is crucial for establishing a legally binding agreement.