Figure 7.2
Before a contract can become legal and enforceable, several elements must first be in place.
(Credit: rawpixel/ pixabay/ License: CC0)
The key to a contract is that there must be an offer, and acceptance of the terms of that offer. An offer is a
proposal made to demonstrate an intent to enter a contract. Acceptance is the agreement to be bound by the
terms of the offer. Offers must be made with intent, must be definite and certain (i.e., the offer must be clearly
expressed for it to be enforceable), and must be communicated to the offeree. An acceptance must
demonstrate the willingness to consent to all of the terms of the offer.
Genuine agreement, i.e., “a meeting of the minds,” is also required. Agreement can be destroyed by fraud,
misrepresentation, mistake, duress, or undue influence.
Consideration must be included in contracts. Consideration is a thing of value promised in exchange for
something else of value. This mutual exchange binds the parties together.
Capacity to contract is the next element required for a valid agreement. The law presumes that anyone
entering a contract has the legal capacity to do so. Minors are generally excused from contractual
responsibility, as are mentally incompetent and drugged or drunk individuals.
Finally, legality is the last element considered. Parties entering into contracts that involve illegal conduct may
not expect judicial relief to have that contract enforced. This theory has also been applied to conduct that
would be considered in opposition to public policy.
Consideration and Promissory Estoppel
Contract law employs the principles of consideration and promissory estoppel.
Consideration
In most cases, consideration need not be pecuniary (monetary). Most contracts are enforceable only if each
76
Chapter 7 Contract Law
This OpenStax book is available for free at http://cnx.org/content/col30149/1.5