The contract must also include the name of each party, the agreed purchase price and the object of the sale that would be the property in a real estate transaction, » says Goslett. A valid contract offers protection to both the seller and the buyer. A written contract ensures that each party understands what is expected of them and reduces the likelihood of further disputes or misunderstandings. Contracts arise when an obligation arises on the basis of a commitment of one of the parties. In order to be legally binding as a contract, a commitment must be exchanged for appropriate consideration. There are two different theories or definitions of consideration: the bargain consideration theory and the benefit-harm consideration theory. Those who sign the contract and conclude it must be competent. .