Elements of a Contract Paper Example

One of the most important tenets in law is: “if it’s not in writing, it did not happen. ” The law could protect better either party engaged in an agreement if the agreement was put in writing in the form of contracts. It is essential, therefore, to form contracts between two or more parties, especially those engaged in business, to avoid difficulties in winning a claim in case there is a breech in the agreement. A contract is an exchange of promises between parties. It is an agreement between two or more parties to do or refrain from doing something.

Almost everyone engage in a contract. It may be oral or written. However, written contracts are preferred as most jurisdictions may render oral contracts unenforceable. There is almost always enough room for disagreement and parties may claim something other than what was agreed upon without proper documentation, usually a written contract. Contracts have certain elements for it to be considered valid and binding. Consent to the terms of agreement is the most important element of a contract. Without consent, there can never be an agreement, hence, no contract.

There must be consensus ad idem or a meeting of the minds before there can be any contracts. Ollek (n. d. ) held that “there must be an intention to enter into a legally binding contract” for it to be effective. There must be an offer of the terms from one side and acceptance of the offer from the other. Furthermore, valid consent is given only by those who have the legal capacity to enter a contract. The object or purpose is the next element of a contract. This is the offer made by the initiating party.

This is simply a statement that a certain party is prepared to enter into an agreement with another on certain terms. It is also implied that the party making the offer “is prepared to be bound by the terms” (Ollek, n. d. ) of the agreement if ever it is accepted by the other party. Oftentimes, the offer has certain time limit where it could be accepted. Furthermore, objects must also be legal. If the object is illegal because of the statute of common law, it will be considered void. The last element is the consideration. Each party involved in the contract must receive something of value.

Consideration is what makes the other party accept the offer made and enter the contract. It may also be “some benefit or advantage to the person making the offer and a corresponding cost or prejudice to the person accepting the offer” (Ollek, n. d. ). Ollek (n. d. ) explained that “the law only requires that there be sufficient consideration” and that only the party involved can “determine whether or not the consideration is adequate. ” Any contract without this element is not considered as legally binding, hence is void, and there is no contract at all.

Acceptance should be made before the offer has expired. It is “an expression of absolute and unconditional agreement to all the terms set out in the offer” (Smithies, 2007). Acceptance must be clear and without conditions. There are no conditions attached and that the terms could not be changed when the offer is accepted. If there are conditions or the terms are changed, the parties are merely negotiating. The contract is said to be struck once the parties have reached an ultimate agreement from an initial offer or negotiation and when the other party has accepted the offer.

Capacity is the ability to know and understand the terms of agreement. A contract is valid when the parties have the legal capacity. This means that when a party does not have the legal capacity to enter a contract, the contract is said to be void and is not legally binding. Most adults have the capacity to enter into a contract. Minors and mentally incompetent individuals are considered by most states not to have the capacity. It is understood that an individual without the capacity could not reasonably give its consent, thus the first element is missed out and the contract is void.

An individual who could not understand the terms of contract also do not have the capacity to accept it reasonably, even with sufficient consideration is given. Deficiency in capacity to contract could be resolved through genuine consent. A durable power of attorney is one way where a person currently with legal capacity appoints someone else to act on his or her behalf. It remains valid even when the principal becomes incapacitated. Simply put, a durable power of attorney empowers an agent to act in capacity of the principal.

Conservatorhip is another way where an individual without capacity to contract may be engaged in a contract. An individual with close relationship with the incapacitated person may ask a probable court to appoint him or her as a conservator for the incapacitated person’s holdings, manage the affairs and enter into contract. In general, as long as the elements of contract exist, the parties involved have a binding and valid contract—that is parties involved must consent to the agreement, there is an object or purpose, and there must be consideration.

Contracts are not required to be written. However, it will be difficult for the court to determine the terms of the contract. Without proper documentation, a party creates an opening for the other party to contest a fact in the agreement that would otherwise be locked had it been written. The contract’s object or purpose must also be legal; otherwise the law would not recognize it. Furthermore, the consenting parties entering the contract must have the capacity to understand the terms of agreement.

In case where an individual does not have legal capacity, that individual may appoint another individual to act in his or her behalf, or that a close relation may apply for conservatorship to manage the individual’s affairs. References “Elements of a contract. ” Retrieved August 13, 2008 from http://www. otto-graph. com/samples/3/contractlaw. html Ollek, S. S. (no date). “Essentials of a contract. ” Retrieved August 13, 2008 from http://www. e-law. bc. ca/art_essential. html Smithies, D. (2007). “Contract – Elements of a contract. ” Retrieved August 13, 2008 from http://tutor2u. net/law/notes/contract-elements. html