What are the key elements of a binding contract?
Competent Parties - For a contract to be valid, each side must have
1-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.
2-Consideration - If the other side is to be held to the contract, you must give up something in exchange. This is
called consideration.
3-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.
4-Agreeing to
perform an illegal or illicit act is not consideration and the contract is void.
5-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.
6-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:
(a) One side is obviously joking or bragging,
(b) 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
(c) Both sides have made a material mistake as to
the terms or details of the contract.