The Elements of a Valid Contract

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The Elements of a Valid Contract

A valid contract is not just an agreement between two parties, requiring them to show their accord to its terms and condition. On the contrary, there are numerous elements of a valid contract, which the parties should consider while entering into an agreement. 

For a contract to be valid, it must include an offer, acceptance, consideration, intention, legality, and capacity. Hence, the contract loses its validity if any one of these elements is missing.

Contract Consideration

Contract Consideration

  1. Offer and Acceptance

This is the first and basic element of a contract, as without an offer, no party can enter into a contract. An offer is presented by a party to another party with a view to exchange a thing having value with something else that is valuable to the party making an offer. In fact, an offer is referred to as the terms, which constitute a particular contract.

For example, when a caterer wants to make a Catering Contract, the offer made to the client includes the relevant terms of the services such as the cost of service and catering schedule. The client can accept or decline an offer after it is made. Once accepted, it takes the shape of a contract.

Both offer and acceptance are essential aspects of a contract, which ensure that all important terms have been acknowledged, accepted, and agreed. The acceptance may either be expressed (written form) or implied (ascertained through the conduct of the party to which offer is made). 

For example, if someone offers a person to do a task and the person completes that task without expressing his consent in either writing or verbally, his action suggested that he had accepted the contract. As a result, that person is eligible to be get paid.

  1. Consideration

Consideration is mainly the benefit that both the parties avail through a contract. In most of the cases, money is the consideration for one party whereas to another party, it relates to the service or anything else that is valuable. Apart from this, right or interest can also be treated as a consideration.

For example, if the neighbors agree to share their backyards, they are actually offering a right that benefits them both. Hence, you can easily ascertain that the consideration in this case is a right to access the backyard.

However, anything (money or service) provided prior to the contract can’t be referred to as the valid consideration to form a contract.

  1. Intention or Mutuality 

In absence of an intention or mutuality, it is not possible to form a contract that is legally valid. This suggests that all the parties to a contract must have an intention to create and enforce a valid contract. For instance, parties making a sale agreement must have an intention to carry out this agreement. By doing so, they ensure that the mutual benefits of both the parties stay guarded.

During routine business dealings, parties do respect the terms of a contract. However, when friends or family members enter into a contract, things don’t go the way as expected. This is the reason most of the parties prefer to put their contract in writing to avoid any uncertainties.

Besides, any false statement, unconscionable dealings or undue influence makes a contract void, as these factors show that a lack of intention or mutuality is prevailing.

  1. Legality

The subject matter of a contract is of great importance, as it relates to the legality of a contract. Legality is an element, which suggests that whether a contract is valid or invalid. Among other elements of a valid contract, legality is the most essential one. It prevents the party to enter into a contract that involves illegal acts or omissions.

For example, if A offers money to B and asks him to steal C’s car, it can’t be treated as a valid contract even though it has the elements of offer, acceptance, and consideration. Since stealing someone’s property is prohibited by law, this challenges the validity of such a contract.

Therefore, a contract without legal backing is null and void. Moreover, the party to such a contract can’t ask for a legal remedy in case another party refuses to fulfill its commitment. 

  1. Capacity

As a matter of fact, only an eligible person can enter into a valid contract. This is known as the capacity to make a contract. An individual must have the legal ability to sign a contract; otherwise, it will be considered as invalid.

The word capacity relates to the mental ability of a person to understand the terms and contents of a contract. For instance, an individual who is mentally ill or incapacitated (lunatics) can’t present himself as a party to a contract.

Capacity is one of the essential elements of a Valid Contract, which ensures the validity of a contract. If a person of unsound mind enters into a contract, it is not possible for him to fulfill the commitments due to his inability to understand and perform the terms of such a contract.

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