A contract is an agreement that involves two or more parties with the aim of creating a lawful responsibility. The accord sets the limits and dictates how the entities, the offeror and the offeree are expected to conduct themselves. A contract clearly states the mandates of each party and the consequences that can follow if one party fails in its designated responsibility (Goldman & Sigismond, 2010).
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Thus, it is important to understand the elements of a valid contract to avoid any disagreement among parties. The major elements of a contract are: offer, acceptance, legal consideration, object, capacity of parties, and consent.
In business contracts, an offer refers to what one party is willing to do for the other party. Alternatively, it can be something that one party is willing to give to another party in the contract. The offer must be communicated to all the parties – it can be oral or written. Field (2011) states that the offer must be clearly stated in terms of the target object, conditions, and the parties involved.
Once the offer is communicated, acceptance of the terms and conditions of the offer creates a contract. This implies that the offeree must also communicate the acceptance to the offeror, which exactly reflects the offer made. An offer becomes invalid once an acceptance has been received and therefore, the offering part should no longer communicate the offer to the accepting party.
Additionally, legal consideration seeks to bind the contracting parties. Consideration refers to what the parties earn from a contract. Without a consideration, a contract is not valid because the consideration is supposed to influence the parties to stick to the contract. The consideration can be in any form, such as money and so forth. Lawful consideration is essential because an agreement is only valid when there is something in return, not necessarily cash, but an act, abstinence or promise, and to do or not do something (Mallor et al., 2010).
Object of the contract is also an important element of a contract which must be legal. Object refers to the thing that is making people to enter the agreement; without it, the agreement is not valid. For instance, in an employment agreement, the job position is the subject of the agreement because if it were not there, the parties would not have needed the contract, and hence it is the backbone of an agreement.
Capacity of the parties also determines the nature of a contract. Contracts are open to all persons as long as they are not underage. Besides, for an individual to enter or participate in an agreement, he/she must have sound mind. This implies that a contract does not consider a child as a party.
People who are out of their mind are also exempted from this role because they are not conscious about themselves. Goldman and Sigismond (2010) explain that children who are below the age of 16 can only enter contracts through their parents or a guardian.
Furthermore, consent is required for a contract to be valid. A contract requires the signatures of the entities that are involved in it. However, the law does not recognize consents granted through manipulation or force.
For instance, a person who is under the influence of alcohol cannot give genuine consent because alcohol impairs one’s judgment. This means that communication must take place before granting consent to ensure that all the parties are acquainted to the terms of the contract. It is therefore important to draw conclusions before signing the contract document.
In conclusion, understanding the elements of a contract is important because they are the aspects used to evaluate the validity of an accord in a court of law. This is because most business people are fond of entering agreements without prior understanding of the elements of a valid contract. All the parties should analyze their capacity before entering an agreement.
The major elements of a valid contract include offer, acceptance, legal consideration, object, capacity of parties, and consent. Before filing a lawsuit, it is important to evaluate one’s capacity and the object of a contract because unjustified claims will only lead to occurrence of unnecessary expenses. Therefore, having appropriate legal capacity binds the subjects or parties to the contract and avoids dispute.
Field, C. (2011). Elements of a Contract. The Law Handbook. Australia: Fitzroy Legal Service. Web.
Goldman, J.A. & Sigismond, D.W. (2010). Business law: Principles and Practices. Mason, OH: Cengage Learning.
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Mallor, J.P., Barnes, A.J., Bowers, T., & Langvardt, A.W. (2010). Business Law: The Ethical, Global, and Ecommerce Environment (14th ed.). New York: Irwin/McGraw Hill.