Wednesday, May 19, 2021

Essential Elements of a Valid Contract

 Essential Elements of a Valid Contract

A contract is formed when certain requirements are met. The law will consider a contract to be valid if the agreement contains all of the following elements:  

1. Offer and Acceptance; 

• Example offer: Joe offers to sell his car to Sally for $5,000. 

• Example acceptance: Sally agrees to buy Joe’s car for $5,000. 

• Can be done orally or in writing. Certain contracts must be in writing. See our Blog post “Florida Statute of Frauds: Contracts that Must be in Writing.”

2. An intention between the parties to create binding relations; 

• offer + acceptance = “meeting of the minds.” Meeting of the minds means the parties intend to be bound by their agreement.

3. Consideration; 

• Each party must promise or provide something of value to the other party. A bargained for exchange. 

• Example: Joe’s consideration is his promise to sell his car to Sally. In exchange, Sally’s consideration is her promise to pay Joe $5,000. 

4. Legal capacity of the parties to act; and 

• The parties must understand what they are doing. 

• Example: Insane individuals lack capacity to enter into legally valid contracts because they cannot understand what you are doing. Minors do not generally have the capacity to enter into a contract (with some exceptions). 

5. Legality of the agreement. 

• The purpose of the agreement cannot violate the law. 

• Example: A contract hiring someone to rob a bank or kill a person is invalid because it violates the law.

• An agreement that lacks one or more of the elements listed above is not a valid contract.

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