What Are the Essential Elements to a Valid Contract?

A contract is something that you do not want to play fast and loose with. Indeed, a good contract is crafted in such a way that there are virtually zero loopholes that could possibly be exploited. However, crafting the perfect contract is not a simple process.

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Heck, there are lawyers who make a point of figuring out how they can exploit any and all loopholes, so that is definitely something to watch out for. In order to help avoid these pitfalls, we have constructed a guide to help you create a valid contract and avoid sloppy errors.

The essential elements of a valid contract

Check through it carefully

A good contract should be looked over with a fine-tooth comb, not allowing any irregularities, mistakes, or general loopholes to go unnoticed and unchanged. Even if you think you have constructed an airtight contract, don’t take any chances with that. All too often, arrogance has been the key downfall of a person when trying to construct a contract. But ultimately, it is important that you consider these four significant qualities: agreement, capacity, consideration, and intention.

The agreement portion of the contract is basically the offer being made by the person or persons that crafted the contract, and then indication that the other person accepted the offer. First off, the offer could be a tangible object — such as a possession of which you are transferring ownership — or it can be an employment contract.

This part is the most important part of the contract, obviously, because it is the ultimate goal of a contract, the exchange of a possession or anything else on offer. Granted, that does not mean that you should not take care with other parts of the contract, as a contract is only as strong as the weakest portion of it, after all.

Acceptance

The next step of it is the acceptance portion of the agreement. It is important to note that acceptance requires explicit consent to the offer, and that silence does not constitute any form of acceptance. This is demonstrated by the party accepting the conditions of the contract signing it with their name. And while they may not be willing to accept the offer you have made, they may still accept another offer, pending a negotiation.

Capacity to..

Next up, we have capacity, where all parties involved need to have the capacity to understand the nature of the contract as well as the benefits and risks associated with entering into it. For example, if one or more parties do not fully understand the obligations associated with it, the contract cannot go through until such time that they do have that understanding. They also must be able to consent to enter a contract, and not under duress.

There are also special considerations made for people in certain groups. One of these is for children under 18 years of age, who can only enter into contracts and legal documents for necessities, such as food or clothing, or entering into a contract for education, employment, or apprenticeship. And even with those limitations, the terms are required to be weighed in favor of being fair and beneficial for the child’s interests.

People who suffer from certain mental health issues and/or developmental disorders also have certain protections afforded to them. Basically, any mental affliction that prevents them from being fully cognizant of the implications of the contract.

This is also true if the person is under the influence or a drug or alcohol. It’s especially problematic if the person getting them to accept the contract is aware of the fact that they are under the influence of an inhibiting substance or dealing with a mental deficiency.

If you do such a thing, and it is shown that they were not fit to enter into a contract, they can then choose whether they want to continue participating in the contract.

Considerations for the exchange of value

Next up, the contract has to have consideration for the exchange of value. For example, if you sell a car for as little as a dollar, that would count as an exchange of value, even if the exchange is considered to be at all disproportionate.

Other types of value exchanges may include property, a promise, an act, or even agreeing to not act at all. Not all consideration may be sufficient, however. For example, a service a person already renders cannot be used as consideration for a contract, nor can the consideration involve any illegal behavior.

Finally, the intention of a contract has to be included. Basically, this is the portion of the contract that establishes that it is… well, a contract. After all, not all agreements are considered contractual in nature, and without the intention stated, a contract may be good for nothing as far as enforcement goes.

It is important that your contract not only come with a stated intention for it to be a legally binding one, but also proof that the other party or parties agreed to enter into it, such as having them sign with a notary on hand. Anything you can do to make sure that everyone is on the same page, literally and figuratively.


Interesting related article: “What is a Lawyer?