Requirements of a Contract: Everything You Need to Know
The requirements of a contract are consideration, offer and acceptance, legal purpose, capable parties, and mutual assent. 3 min read
3. Offer and Acceptance
4. Legal Purpose
5. Capable Parties
6. Mutual Assent
7. The Contract as a Document
8. The Contract as a Process
9. Other Contract Law Regulations
10. When Does a Contract Exist?
11. Does a Contract Have to Be Written?
12. More About the Requirements of a Contract
Requirements of a Contract
The requirements of a contract are consideration, offer and acceptance, legal purpose, capable parties, and mutual assent. When any of the required elements is lacking, vitiated, or irregular, the contract may become void, voidable, or unenforceable.
Consideration is the value that convinces the parties to engage in a contract. Each party agrees to furnish an item of value to the other party in a contract.
An example of consideration is when you are selling a boat. You want the buyer to pay you a certain amount, and then you, as the seller, will give the buyer the boat.
Time considerations, payment terms, and any other expectations are factors that are associated with consideration. A contract will only be valid if both parties involved have clear consideration.
Offer and Acceptance
A contract needs to have a valid, understandable, and specific offer, and there must be acceptance of the offer. Both the offer and acceptance of offer must be brief but clear enough so there will be no room for error.
Acceptance can be oral, written, or by way of conduct. In some instances, an exchange of words such as, "Would you take $100 for this boat?" and "Yes", is enough to constitute offer and acceptance.
A contract must have a legal purpose that does not break any law. For example, it is not legal to hire someone to break into a building and steal something. If you get into an agreement to commit an illegal act, this would not represent a legal contract.
The contract must meet the requirement of both implied and express statutory legality and of common law legality. In many cases, state and federal authorities may demand that more conditions be met.
One must know or comprehend what one is doing to be considered "capable" of making a contract.
Minors and individuals who have been proven insane are usually classified as not capable of entering into an agreement because they do not know what they are doing. Additionally, persons under the influence of drugs or alcohol can't enter into any binding contract.
Both parties must enter into the contract willingly and not be forced to do so.
Each party in a contract has to agree on the meaningful terms and to be bound by the contract. Simply put, the parties must see eye-to-eye regarding the nature of the agreement and the contract specifics.
The Contract as a Document
While there are instances when verbal contracts are acceptable and binding, the preferred form of a contract is in writing. Written contracts generally leave no confusion when legal matters arise.
Contracts as documents often include statements of the reason for the agreement, obligations of the parties, exhibits, definitions, and other pertinent details.
The Contract as a Process
As a process, once the parties agree that they can trust each other, they will negotiate the terms of the contract, whether written or not. After the contract is in place, each party must carry out their individual obligations. If either party fails to do so, the opposing party can sue for breach of contract and have the contract legally enforced.
Other Contract Law Regulations
In order to find out if your contract is valid and also to be advised on the actions you need to take moving forward, you will want to contact a reputable local contract law attorney.
When Does a Contract Exist?
When a breach of contract suit is filed by one party, the judge must first answer the question of whether or not a contract existed between the parties in the first place.
The complaining party must prove four elements to show that a contract existed. These elements are offer, consideration, acceptance, and mutuality.
Does a Contract Have to Be Written?
When it comes to filing a breach of contract lawsuit, the statute of limitations plays a large role in the difference between verbal contracts and written ones. It is always better to go with a written contract for this reason too.
More About the Requirements of a Contract
If you have more questions about the requirements of a contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.