Contracts are a part of most business relationships and business transactions which is why they are important to understand. The elements that make up a contract are an important part of enforcement of contracts that govern most business relationships. For that reason, business owners should be familiar with the elements of a contract and what they can do in circumstances of a contract dispute.
Elements of a valid contract
There are several important contract elements to be familiar with:
- Offer: There must be an offer for goods or services in order for a contract relationship to be formed. The offer should be clear and specific.
- Acceptance: There must be an acceptance of the offer for a contract relationship to be formed. The acceptance of the offer must mirror the offer to ensure that there is a meeting of the minds between the parties for a contract relationship to be formed.
- Consideration: There must be some type of consideration for a contract relationship to be formed. Consideration is commonly the exchange of something of value. This can refer to money but does not have to and can include a promise to do something or a promise of inaction.
- Legal Capacity: The parties to the contract must have legal capacity to enter into the contract. This is typically a requirement that the parties are over the age of 18 which is commonly the legal age to enter into a contract.
- Legality: the subject matter of the contract must be legal for the contract to be legally enforceable.
The contract should also include a statement of mutuality in most instances and it is always a good idea to have contracts in writing. Contract disputes can arise based on a variety of factors and can be a headache for business owners. For that reason, they should be familiar with the elements of a valid contract which will help them enforce their contract and access contract remedies in the event of a contract dispute.