Key Takeaways

  • A valid contract must include offer, acceptance, intention to create legal relations, lawful consideration, and certainty of terms.
  • Capacity of parties is essential—each must be of sound mind, of legal age, and not legally disqualified.
  • Free consent ensures that agreements are not formed through coercion, fraud, misrepresentation, undue influence, or mistake.
  • Contracts must be for lawful objectives; agreements involving illegal or immoral activities are void.
  • Documentation strengthens enforceability, but some agreements must legally be in writing (e.g., property sales, leases).
  • Void and voidable conditions exist; contracts may fail if elements are missing or consent is improperly obtained.

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.

Awareness and Mutual Assent

Beyond simple offer and acceptance, both parties must demonstrate awareness and mutual assent. This means each party understands the terms, is aware that a contract is being formed, and agrees to the obligations. If one party lacks awareness—for example, signing without understanding the nature of the agreement—the contract may be unenforceable. Courts often look for a “meeting of the minds” where both sides share a clear understanding of the agreement’s essentials.

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.

Capacity of the Parties

For a contract to be valid, both parties must have the legal capacity to enter into it. Capacity includes:

  • Age: Individuals must be of majority age (commonly 18 in most jurisdictions).
  • Mental soundness: Parties must be of sound mind and able to understand the implications of the agreement.
  • Legal eligibility: Some individuals—such as bankrupt persons or those restricted by court order—may be disqualified from contracting.

If a party lacks capacity, the agreement can be declared void or voidable depending on the circumstances.

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.

Lawful Object and Legality of Purpose

Even if consideration is present, a contract must have a lawful object. Agreements are void if they:

  • Involve illegal activities (e.g., contracts for the sale of prohibited goods).
  • Violate public policy (e.g., agreements restraining marriage).
  • Require immoral acts.

Courts will not enforce agreements that promote unlawful or unethical objectives. This safeguard ensures contracts align with public interest and legal frameworks.

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.

Free Consent

Consent is valid only when it is given freely. A contract entered under coercion, fraud, undue influence, misrepresentation, or mistake is not enforceable. Examples include:

  • Coercion: Threatening harm unless the contract is signed.
  • Fraud/Misrepresentation: Presenting false information or concealing facts.
  • Undue Influence: Taking unfair advantage of a position of power.
  • Mistake: Entering into a contract under a fundamental misunderstanding.

Free consent protects the fairness of contractual obligations.

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.

Written vs. Oral Agreements

While many contracts can be oral, written agreements provide stronger evidence in court. Certain contracts—such as those for the sale of land, long-term leases, or high-value transactions—are legally required to be in writing. Written contracts also make it easier to specify obligations, timelines, and remedies, reducing the risk of disputes.

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.

Void and Voidable Contracts

Not all defective contracts are treated equally. A void contract is invalid from the outset, often due to missing essential features like legality or capacity. A voidable contract, however, is initially valid but may be canceled by one party if issues such as misrepresentation or undue influence are proven. Understanding this distinction helps businesses assess risks when entering into agreements.

Frequently Asked Questions

  1. What are the essential features of a valid contract?
    A valid contract requires offer, acceptance, intention to create legal relations, lawful consideration, capacity of parties, free consent, and a lawful object.
  2. Can a minor enter into a valid contract?
    Generally, no. Contracts with minors are voidable or void, except for necessities like food, shelter, or education.
  3. Why must a contract have free consent?
    Free consent ensures fairness. Contracts formed under coercion, fraud, undue influence, or mistake can be voidable.
  4. Are oral contracts enforceable in court?
    Yes, but they are harder to prove. Written contracts are preferred, and some contracts (like property sales) must legally be in writing.
  5. What makes a contract void or voidable?
    A contract is void if it lacks legality or capacity. It is voidable if one party’s consent was not freely given, such as through fraud or undue influence.

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