Knowing the features of a valid contract is an important part of entering into any agreement. A contract is an enforceable agreement between two parties. It's created in several different ways including:

  • Orally
  • In writing
  • By inference
  • By any combination of the above

There are also certain items that need to happen for a contract to be considered binding. A contract must:

  • Have an offer and acceptance
  • An intention to create a legal relationship
  • A certainty in the terms

Offer and Acceptance

A contract is basically formed when an offer is accepted. This makes it vital that the offer is clear, definite and final when it is communicated to the offeree. Once the original proposal is accepted it becomes an agreement. The agreement must be consensual on both sides and both parties must agree to all facets of the agreement. There are important things to remember in regards to offers and acceptance:

  • Offers can be revoked at any time before acceptance occurs.
  • Offers must be distinguishable from an invitation, so the other party knows they are entering into a contract.
  • The acceptance must be for the offer made if not, it will be considered a counter-offer.
  • Acceptance of an agreement occurs when it is received.

Intention to Create Legal Relationship

To create a legally binding agreement, both parties must intend to enter into a legal relationship. For example, social agreements are not considered valid contracts because the parties don't expect them to be legally binding. Once both parties agree to a contract, they are bound by it, though the contract could be conditional based on other matters.

Lawful Consideration

The consideration portion in a contract is something that you expect to get in return. Consideration can take numerous forms such as:

  • Cash
  • Goods
  • Act
  • Abstinence

Every contract must be supported by consideration and the consideration must be valuable. The consideration cannot be unlawful or gratuitous and it cannot be considered a past consideration.

Certainty and Possibility of Performance

If a contract meaning is uncertain or the contract is not capable of being certain, then the contract would be deemed void. This means that the terms and conditions of the contract should always be certain especially in regards to:

  • Parties
  • Subject
  • Matter
  • Price

The terms of the agreement cannot require an impossible act and both parties of the contract must agree to the terms and conditions.

Proving a Contract

Contracts exist for the parties involved but also in case any legal action occurs. If the contact is part of a case, proving its existence may become necessary. In this situation, oral contracts are extremely difficult to prove. Other contract types like written ones are easier to prove because of the paper trail involved.

Enforceability of a Contract

Even if a contract has all of the essential elements there is still a risk of it being deemed unenforceable due to other issues such as:

  • Lack of capacity of one party to enter into the contract.
  • Mistakes in the nature of the contract,
  • Misrepresentations of facts included in the contract.
  • An illegal or immoral contract, or a contract that was created under duress.
  • A contract that restricts one person's trade.

Both persons need to be legally able to enter into a contract and meet the eligibility requirements called the Capacity of Contract. Every person entering into a contract should be:

  • Of legal age to enter into a contract.
  • Of sound mind.
  • Not disqualified from entering into a contract.
  • Entering the contract of their own free consent.

A contract can also be voidable in the event of unilateral as well as mutual mistakes. Additionally, when a contract is gained through unfair means it could also be considered voidable.

There are some contracts that are required to be in writing in order for them to be enforceable. This includes contracts such as:

  • Sale
  • Lease
  • Mortgage
  • Gift
  • Immovable property

It is important that all legal formalities be satisfied for a contract to be valid such as stamp duty. To be enforceable it is also required that the contract create a legal obligation. A one-directional consideration is considered friendly relations and a two-directional consideration a legal one.

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