Essential Elements of a Contract
“A contract is an agreement that can be enforced in court. It is formed by two or more parties who agree to perform or to refrain from performing some act now or in the future.” (pg 208) Recently I was faced with a situation regarding a contract that was not in writing and I had to explain that as long as a verbal contract contains the four essential elements of a contract it is binding. We are so accustomed to seeing contracts in writing that many people assume that a contract must be a long and drawn out document before it is enforceable. For a contract to be enforceable, whether is verbal or in writing, one page or ten pages long, there are four elements that need to be present, and they are: (1) Agreement: which consists of an offer and an acceptance of that offer (for the offer made in the initial stages of the contract must itself be considered a valid offer. For an offer to be ‘valid’, it must be communicated, there must a commitment made and there must be definite terms agreed on.), (2) Consideration which is what each party gives to the other as the agreed price for the other's promises. Usually the consideration is the payment of money but it need not be; it can be anything of value including the promise not to do something, (3) Contractual Capacity which simply means that the parties entering into the contract must be legally able to do so; they must be considered legally competent. Generally meaning being of legal age and having a sound mind, and (4) Legality which means that whatever the parties have contracted to do is legal and considered to be against public policy. However in the event that all of the elements for a valid contract are present and it is determined that (1) the consent of the parties involved in the contract was given under duress or under fraudulent circumstances or (2) the contract is not written in its proper form (the law stipulates that certain contracts must be in writing) a contract can...
References: Business Law Today, TEXT & CASES: E-Commerce, Legal, Ethical, and Global Environment, Comprehensive Edition NINTH EDITION (2012), Roger LeRoy Miller, Gaylord A. Jentz, Herbert D. Kelleher
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