Requirements to Form a Contract - Explained
Offer, Acceptance, and Consideration
If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.
- Marketing, Advertising, Sales & PR
- Accounting, Taxation, and Reporting
- Professionalism & Career Development
Law, Transactions, & Risk Management
Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
- Business Management & Operations
- Economics, Finance, & Analytics
What elements are required to form a valid contract?
As previously discussed, a contract is a specific promise to another and also a specific demand of that person. The demand could be a promise of future action (bilateral contract) or immediate performance of an act (unilateral contract). The promise and demand is an offer. Meeting with the offerors demand is known as acceptance. Both parties must give or exchange something of value with the other. The thing of value is known as consideration. Consideration is the promise to give, or actual giving, of a requested benefit or the incurring of a legal detriment (i.e., doing something one does not have to do.). Both parties must be of a legal age and sound mind, and the purpose of the agreement cannot be illegal or against public policy.
Example: One person offers to sell a product, service, or offers something of value (money, goods, etc.) in exchange for someone elses product, service, or other thing of value. This constitutes a valid offer. The things of value constitute consideration. A second person accepts the offer by either agreeing to the offerors request to trade things or actually trading those valuables.
Note: An important thing to remember is that each party must provide something of value to the other. It does not matter how much value or even whether anyone else in the world would consider it valuable.
Next Article: Enforceable vs Valid Contract Back to: CONTRACT LAW
Why do you think that the law requires an agreement to have all of the elements to be enforceable? Can you think of situations where any of these elements are not present, but you believe the agreement should be enforceable anyway?
- What is a Contract?
- Contract Theory Definition
- Meeting of the Minds
- Doctrine of Utmost Good Faith
- Aleatory Contract Definition
- What are the sources of contract law?
- Restatement of Contracts
- Uniform Commercial Code
- Convention on Contracts for the International Sale of Goods (CISG)
- What is a Unilateral Contract vs a Bilateral Contract?
- What is an Express Contract vs an Implied Contract?
- What are the requirements to form a Contract (Offer, Acceptance, Consideration)?
- What is an Enforceable Contract vs. a Valid Contract?
- What is a Void Contract vs a Voidable Contract?
- Adhesion Contract
- What is Mental Capacity to contract?
- What is the requirement of a Lawful Purpose?
- What are common types of Voidable Contract?
- When does an offer to contact terminate?
- Counterparty Definition
- Mirror Image Rule?
- Rule for Sale of Goods
- Silence is Not Acceptance?
- Mailbox Rule
- Shrink-wrap Agreement Definition
- Click-Wrap Agreement Definition
- What is Consideration?
- What is Promissory Estoppel?
- When is a contract required to be in writing Statute of Frauds?
- What type of writing satisfies the statute of frauds?
- Exceptions to the Statute of Fraud
- Documents Under Seal
- Who Can Sign Contracts on Behalf of a Company?
- E-Sign Act
- Privity of Contract
- Who are third-party beneficiaries to a contract?
- What is assignment and delegation of a contract?
- When is a party's Duty of performance?
- Aleatory Contract
- What is an Executed contract vs an Executory contract?
- Inchoate Definition
- Evergreen Contract
- What is Performance, Substantial Performance, and Breach of a contract?
- What is performance of a Divisible Contract?
- When is a party's duty of performance discharged?
- What are conditions to Contract (Precedent & Subsequent)?
- Abandonment Option (Contract) Definition
- Cooling Off Rule Definition
- What is tender performance of a contract?
- What are Impossibility and Impracticability
- What is a Frustration of Purpose?
- Waiver or Release from Contract
- Accord and Satisfaction
- Force Majeure Clause
- What is a Breach of Contract?
- Repudiation (Contract) Definition
- Anticipatory Repudiation
- Acceleration Clause (Contracts) Definition
- What methods exist for resolving a breach?
- What remedies exist for a breach of contract?
- Rescission (Contract)
- Exculpatory Clause
- Hold Harmless Clause
- What is Efficient Breach?
- Organization of a Contract
- How to Read the Contract
- Contract Representations & Warranties
- Contract Covenants
- What rules does a court follow in interpreting a contract?
- Allonge Definition
- What is the Parol Evidence Rule?
- What is a complete integration vs a partial integration?
- Exceptions to the Parol Evidence Rule
- Patent and Latent Ambiguity in a Contract
- Service Level Agreement Definition
- Offtake Agreement