Contracts: The Ultimate Business Agreement

What Makes a Contract Valid?

A valid contract at its simplest is a legally enforceable agreement.

They are established when it contains several key elements:

offer,

acceptance,

consideration,

capacity,

and lawful purpose.

Your contractual agreement is comprised of both the offer and it’s acceptance. The offer must be properly communicated by the offeror. Then the offeree must agree to be bound to the terms of the contract. This completed process means that the offer has been accepted.

Consideration is a fundamental element of contracts that refers to something of value exchanged between parties. This doesn’t necessarily mean money and can be comprised of an exchange of services but it is crucial in determining the legal status of a contract.

In contract law, minors, individuals with mental incapacities, and those under the influence of substances may lack capacity, potentially rendering a contract void or voidable.

Finally, a valid contract must have lawful purpose. This means, a legally binding enforceable contract must not violate any federal, state, or local laws. An otherwise valid contract will not be enforceable if the law prohibits the courts from doing so.

Important Note:

The plain-meaning rule requires that, if the wording in the contract appears to be plain and ambiguous, its meaning must be determined by the literal definition of the words and phrases in question.