What makes a contract legally valid is mutual consent. A contract must include both parties' free, mutual consent that hasn't been obtained through fraud, duress, or undue influence.

What Are Contracts?

The majority of contracts only require two key elements in order to be legally valid:

  • All parties must agree to the terms
  • An exchange of value occurs, whether that value is cash, goods, or services

Essentially, a contract is an agreement to do or not do something, and a valid contract is enforceable and legally binding in court. The point of any contract is to outline a mutual agreement so that the object in question is accomplished without litigation or dispute.

Everyone 18 years of age and older may enter into a contract as long as they are of sound mind and not a certain type of felon. The contract must clearly state who the involved parties. In some contracts, titles are used such as “seller” or “buyer” to describe the parties.

As far as consent, both parties must provide mutual consent communicated to one another freely and without duress. For example, if someone is forced at gunpoint to sign a contract, it would not be considered valid because there's no free consent. Some cases aren't as clear-cut, but the law accounts for each individual case as needed. Consent isn't considered mutual unless all parties agree on the same thing and have a “meeting of the minds.”

The subject or object of the contract is the thing being agreed upon, and it must be possible, lawful, and definite. For example, a court will not enforce any contract dealing with an illegal act such as a drug deal. As such, someone who has paid for drugs cannot take their dealer to court to get their money back.

Contracts also require consideration, meaning that each party gains something in return for the agreement. In other words, if lawn care specialists say they'll come mow your yard once a week, but you haven't promised them payment or anything of value in return, you cannot sue them for not showing up.

A well-written contract is the best protection against disputes for all parties involved. But there are a few misconceptions worth noting:

  • Words like “whereas” and “whereas that” are often seen in contracts, but they are not required.
  • Using Latin isn't required in a contract.
  • Terms like “aforesaid” and “null and void” are commonly seen in contracts, but they are not required.

In fact, there's a growing movement in the United States and other English-speaking countries to use plain language in contracts. Many states now require consumer contracts to be written in so-called “plain English,” which benefits everyone involved.

Written vs. Oral Contracts

Some situations require a contract to be written, particularly real estate transactions, certain types of debt, or agreements that will last more than one year. Your state may also have other requirements for written contracts.

Even if it isn't required by law, putting agreements into writing makes sense. Oral contracts can be difficult to prove and, as such, difficult to uphold in court. This isn't to say that all contracts must be in writing.

For instance, certain agreements in California can be oral and still enforceable by law. The key is that any contract must include the following features:

  • Parties who are capable of entering into a contract
  • Consent of each party member involved
  • A lawful object or subject
  • Consideration

As long as all elements are met, and an agreement doesn't have to legally be written down, an oral contract is considered valid.

Party Agreement

It cannot be stated enough that all parties involved in a contract must agree to the terms. Having a preliminary discussion is essential in making a solid agreement, but certain situations can blur the lines of agreement. In these cases, the law has defined some rules about when an agreement exists.

A legal agreement must involve:

  • Offers and counteroffers
  • A “meeting of the minds”

The process of entering into a contract involves one party offering its terms and conditions with the other party either accepting or rejecting those terms and conditions. The contract is considered legal when one party makes an offer and the other party accepts the terms.

If you need help understanding what makes a contract legally valid, post your job 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, Stripe, and Twilio.