Elements of a Contract

The Offer of a Contract

When you ask someone to do something, or offer to see someone for a price, you are making an offer. An offer is the first step in forming a contract. The middle step is the other party's acceptance of the deal. The last step is performance -- where you each live up to your side of the bargain.

Words, gestures, or actions can signal an offer to enter into a contract and an acceptance. If you are forced to make an offer ("your money or life") it is not a valid offer. Similarly if you are tricked into accepting, it will not be deemed acceptance of the terms offered. To have a binding obligation on both sides, both sides must approve and accept the terms and conditions of the offer. Offers remain open until: (1) accepted, (2) rejected, (3) retracted prior to acceptance, (4) countered, or (5) expired by their own terms.

If you reject an offer, you have no contract unless at a later date a new offer is put on the table (called a "counter-offer"). A counter-offer is a new set of terms and conditions given in response to the original offer. The difference between the original offer and the counter-offer may be just one clause in particular or multiple provisions or the entire contract.

Be mindful that you can take back or withdraw an offer at any time before the other side has agreed to the deal. This is called retraction (proving that you have withdrawn the offer before the other side accepted may present a problem). On the other hand, changing your mind after you have signed or agreed precludes retraction. Absent compelling reasons for not holding up to your end of the bargain, you will be a party to a contract.

What are the key elements of a binding contract?

Competent Parties - For a contract to be valid, each side must have the capacity to enter into it. Most people and companies have sufficient legal competency. A drugged or mentally-impaired person has impaired capacity and chances are a court may not hold that person to the contract. Minors (e.g., usually those under eighteen) cannot, generally, enter into a binding contract without parental consent, unless it is for the necessities of life, such as food, clothing, or for student loan contracts.

Consideration - If the other side is to be held to the contract, you must give up something in exchange. This is called consideration. No side can have a free way out or the ability to obtain something of value without providing something in exchange. Money is the most common form of compensation, but it can also be property, giving up a right or valid claim, making a promise to do or not to do something, or anything of value. Agreeing to perform an illegal or illicit act is not consideration and the contract is void.

Mutual Assent or Meeting of the Minds - This means that each side must be clear as to the essential details, rights, and obligations of the contract. Putting the deal down on paper prior to signing it goes A LONG way to avoid future misunderstandings and disputes. Meeting of the minds sometimes can be expressed by words spoken or gestures made or can be inferred from the surrounding circumstances. There is no meeting of the minds if: (1) one side is obviously joking or bragging, (2) there is no actual agreement (i.e., the farmer who is selling a gelding and the buyer thinks the horse is a brood mare), or (3) both sides have made a material mistake as to the terms or details of the contract.

Sincerely,  Debt Relief Group - 888--682--2566

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