The requisite elements that must be established to
demonstrate the formation of a legally binding contract are
OFFER
An offer is a promise to act or refrain from acting, which
is made in exchange for a return promise to do the same. Some offers anticipate
not another promise being returned in exchange but the performance of an act or
forbearance from taking action.
Acceptance
Acceptance of an offer is the expression of assent to its
terms. Acceptance must generally be made in the manner specified by the offer.
If no manner of acceptance is specified by the offer, then acceptance may be
made in a manner that is reasonable under the circumstances. An acceptance is
only valid, however, if the offered knows of the offer, the offered manifests
an intention to accept, and the acceptance is expressed as an unequivocal and
unconditional agreement to the terms of the offer.
Consideration
Each party to a contract must provide something of value
that induces the other to enter the agreement. The law calls this exchange of
values “consideration.” The value exchanged need not consist of currency.
Instead, it may consist of a promise to perform an act that one is not legally
required to do or a promise to refrain from an act that one is legally entitled
to do. For example, if a rich uncle promises to give his nephew a new sports
car if he refrains from smoking cigarettes and drinking alcohol for five years,
the law deems both the uncle’s promise and the nephew’s forbearance lawful
consideration.
Mutuality Of Obligation
Closely related to the concept of consideration is the
mutuality of obligation doctrine. Under this doctrine, both parties must be
bound to perform their obligations or the law will treat the agreement as if
neither party is bound to perform. When an offered and offer or exchange
promises to perform, one party may not be given the absolute and unlimited
right to cancel the contract. Such arrangements attempt to allow one party to
perform at her leisure, while ostensibly not relieving the other party of his
obligations to perform.
Competency and Capacity
A natural person who enters a contract possesses complete
legal capacity to be held liable for the duties he or she agrees to undertake,
unless the person is a minor, mentally incapacitated, or intoxicated.
Writing Requirement
Not every contract need be in writing to be valid and
binding on both parties. But nearly every state legislature has enacted a body
of law that identifies certain types of contracts that must be in writing to be
enforceable. In legal parlance this body of law is called the statute of
frauds.
