Essential Elements of a Contract essay

This paper is meant to describe the essential elements of a contract. So, the basic components vital for creating any contract are frequently depicted as:

• An offer
• The acceptance in firm conformity with terms of an offer
• Legal purpose
• Mutuality of the obligation – additionally recognized as the “meeting of minds”
• Consideration
• The competent parties (Wolf, 2009).

Offer: The offer may be defined as the demonstration of “readiness to enter into deal so made as to justify other individual in realizing that his consent to deal is invited and will end it” (Wolf, 2009). The offer frequently has a date till it is valid. Nevertheless, if a date is not obvious, then it is applicable till rejected or accepted. When discarded, offer is not applicable any longer. Thus, if a party suggests car for sale and the other party discards this offer due to the high price, then a seller has right to oppose selling the car at the given price if the purchaser changes own mind and negotiates again (Rao, 2011).

If an offer is accepted and some partial payment is provided, then both parties have to follow the agreement. The offer does not have to be in writing. However, the terms are harder to argue when the offer is made in writing. If the offer is accepted with some modifications, then the first offer is terminated and the novel one becomes valid. It is recognized as counteroffer and the primary offerer may or may not accept it. The offer becomes final once the side accepting an offer performs the obligations (Rao, 2011).

Acceptance: Acceptance of the offer may take place in dissimilar ways. Acceptance of the offer is a demonstration of consent to the conditions thereof made by an offeree in a way invited or demanded by an offer. The acceptance should not alter the conditions of an offer. If it does, an offer is discarded (Wolf, 2009). The material alteration in a contract constitutes the counteroffer, which should be accepted by another party. When the purchaser accepts an offer, keeps goods or fails to refuse them in the restricted time, then an offer is treated as accepted. There are three kinds of acceptance:

• Expressed acceptance. This type of acceptance is the direct acceptance of an offer, without any modifications.
• Conditional acceptance. In this case a contract is made under some conditions. This type of acceptance frequently counts as the counteroffer and is applicable just if another side agrees. Conditional acceptance is additionally when one side is in agreement to pay after goods are delivered on some date at certain place.
• Implied acceptance. The implied acceptance is when one party implies with the conduct, which he accepts an offer. If goods are sent to a client and a client fails to return them in the time he agreed to return goods if he does not like them, he in fact accepts the goods and has to pay for them.

Legal Purpose: An objective of a contract should be for the legal aim. For instance, contract for unlawful distribution of drugs is not binding contract due to the reason for which it exists is not lawful (Wolf, 2009).

Mutuality of Obligation: This part is also recognized as the “meeting of minds”. This component of a contract refers to the parties’ mutual acknowledgement and consent to the expression of the conformity. The parties need to agree in the same sense to the same thing and at the same time (Wolf, 2009).

Consideration: Consideration is when party agrees to the terms of a contract. Consideration is the fundamental part of any valid contract. The consideration comprises either the advantage to promisor or a disadvantage to promisee. It is the exchange bargained for in the return for promise. It can consist of right, profit, interest, or benefit, which ensues to one party, or otherwise, of some patience, loss or accountability, which is undertaken or acquired by another party. This is not crucial for contract to be supported by the monetary consideration.

Many years ago the shaking hands was the demonstration of consideration (Wolf, 2009). This is a “closure” of the contract. Today, when there are lots of dissimilar contracts the consideration can have a very dissimilar expression. For instance, once there is a contract among two parties that the first one will get paid after he creates a house on some place for certain period of time. If a party does create the house on the place for the time in a contract, it is demonstrating the consideration in action. The consideration can be the promise to do something or to avoid doing something. Consideration also should have value, which may be impartially determined. For instance, a marriage binding promise to love somebody is not a consideration. An individual may not be charged in court for not keeping the promise as “love “is an extremely stretchable concept. It is not enforceable as love is subjective by essence (Rao, 2011).

Competent Parties: Parties to the contract should be competent and authorized to enter into the contract (Wolf, 2009).

So, these are the fundamental elements, which create a binding contract.