Essential Elements of a Contract

In order for a contract to be valid and enforceable, certain elements must be met. The rule on this is actually different for sale of goods versus the sale of services, so this article focuses on services. The differences are subtle and will be noted.

Also, it should be noted that just because a contract is not enforceable, doesn’t mean that the person signing it cannot be held liable for the contract.

Offer

The first element is Offer. There must be a sufficiently clear offer made to the other party. The offer must contain all of the essential terms of the agreement, whatever those may be at the time, in order to be a valid offer. Once an offer is made, it remains open until it lapses. This means that a person may accept the offer at any time until one of the following things happen:

1)      The offer is rejected by the offeree;

2)      The offer is rescinded by the offeror;

3)      The offeree provides a counteroffer;

4)      The offer expires due to a time established in the making of the offer (“You have 24 hours to accept”); or

5)      A reasonable amount of time, under the circumstances, has passed.

What is a reasonable amount of time? That’s for the courts to decide, and there’s significant research out there regarding every single item so far discussed in the offer, as with every other area of contracts.

 

Acceptance

If the offer hasn’t lapsed, the offeree can accept it on its terms. This is different in the sale of goods, slightly. In the sale of services, the acceptance must be exactly the same as the offer was made. Therefore, if the offer is for brown trucks and you agree to white trucks, it’s a counteroffer and not an acceptance. Therefore, no deal yet.

 

Contract Consideration

Contracts are not valid unless both sides give up something. This can be anything they have a legal right to give up. The most common example of consideration is money. There are countless things that can be used as consideration; however, there are also many things that cannot. For example, you cannot use a criminal act as consideration. A handshake to rob a bank would not be a valid contract.

You cannot give property owned by another as consideration either, but in certain circumstances, the contract may come into play if you later obtain the property you previously used as consideration. These circumstances can get complicated.

 

Not Void Contract

After you have those three things, you also need to make sure the contract is not void on its face. A contract can be considered invalid for a multitude of reasons, including illegality, competency of one of the parties, and impossibility. A contract where I agree to fly to Europe using only my arms as wings would be void because it is impossible for me to do that.

 

Conclusion

The simplest way to remember this basic portion of contract law is the phrase “O + A + C = K” where O is Offer, A is Acceptance, C is Consideration and K means Contract. The Not Void category trumps everything.

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