Existence of an Offer

A contract is a legal agreement in which two or more parties agree to engage or not engage in certain actions in exchange for something of value. To be considered valid by the court, a contract must contain five key elements: offer, acceptance, consideration, mutual obligation and capacity and competence to consent. Certain contracts must also be in writing. If a contract doesn’t have all five elements, it will not be legally upheld. An offer is simply a promise made by one party in exchange for a specific action or lack of action by another party. For example, if you tell your neighbor you will pay him $4,000 for his truck and he agrees to deliver the truck and transfer title upon receipt of the funds, this constitutes an offer and is legally a contract if the other elements are in place.

Acceptance of an Offer

The other party must agree to the offer in question to validate the contract. This can be in any reasonable manner, such as a handshake or an oral agreement, unless a specific manner of acceptance is stated when the offer is made. Acceptance can only occur if the person knows of the offer, states an intention to accept the offer and unconditionally agrees to its terms.

Understanding Consideration

Consideration refers to the items of value that are exchanged in the contract. For a valid contract, each party must offer something of value. In the example above, the truck and the money exchanged constitute consideration. Consideration does not exist if one item was a gift, if the person was already legally obligated to the contract terms or if the action in question has already been completed.

Mutual Obligation

This simply means that both parties agree to the terms of the contract and perform the obligations therein. If one party does not perform, the contract is not valid. In the example above, if the neighbor already sold his truck to someone else or if you can’t come up with the money, no contract exists.

Capacity and Consent

Not everyone can legally enter a contract. A contract is not valid if one or more of the parties is younger than 18, is not mentally capable of consenting to a contract or was under the influence of drugs or alcohol when the contractual agreement was made. The contract is also invalid if a party agreed under coercion or duress. Before entering a legal contract, confirm its validity with legal advice. For a consultation, contact the team of attorneys at American Legal Care.


A contract can be either written or spoken but it is usually easier to enforce a contract when it is all laid out in writing. Contracts tend to be agreements about such things as terms of employment, sales, or tenancy. Once a contract is executed in a valid manner, it is legally binding and intended to be enforceable by law.

For a written contract to be valid and binding the, it is typical that the following elements must be established in it:

– Offer

– Acceptance

– Consideration

– Mutuality of Obligation

– Competency and Capacity

– Written Instrument


An offer is a promise to act or to refrain from acting. It is made in exchange for a promise to do the same in return. An example of this is when someone needs their kitchen remodeled, a contractor (a licensed builder) that offers to do this for $10,000 is probably doing so on the condition that the homeowner is promising to pay this amount upon the contractor’s completion of the remodel. In the convex, if the owner offers to pay the contractor $10,000 to remodel their kitchen, it is likely on the condition that the contractor will be successful in doing this.


When someone accepts an offer it is an expression to an assent of its terms. The terms of acceptance and the manner in which the offeree is supposed to acknowledge that they are making an acceptance is generally specified in the offer. If the manner of acceptance is not specified in the offer then an acceptance may be made in a manner that is considered reasonable given the particular circumstances of an individual contract.


When parties enter into a contract it is because each of them is bringing some sort of value to the other party or parties involved and this has thus enticed each of them to enter the agreement. In legal speak, this exchange of values is called a consideration. While currency is very often a part of this exchange of value it does not need to be monetary. It may consist of a promise to perform an act or offer a service. An example of this is if a mother promises to buy her daughter a sports car if she gets straight A’s on her next two report cards and the daughter does this, the law deems both the mother’s promise and the daughter’s forbearance lawful consideration.

Mutuality of Obligation

Mutuality of obligation is similar to the concept of consideration. Under this doctrine, the parties involved in a contract must have a mutual obligation to each other. If a contract does not have this, the law will treat it as if neither party is bound to perform.

Competence and Capacity

Unless a person who has legally agreed to a contract is a minor, mentally incapacitated or intoxicated, they may be held liable for the duties they have agreed to undertake.

Writing Requirement

Not all contracts need to be in writing to be legally binding and valid for all parties involved but there are certain types of contracts that must be in writing to be enforceable. Different states have different requirements for different types of contracts.

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