Running Head: ELEMENTS OF A CONTRACT

Elements of a Contract Joelle Yeager BUS 670: Legal Environment Professor Toni Starcher December 19, 2011

ELEMENTS OF A CONTRACT

In order for a contract to be formed between two parties, the parties must follow a set of key elements before the agreement can be treated as a contract. These requirements must be based on a voluntary agreement between the offeree and the offeror (Mallor, Barnes, Bower, & Langvardt, 2010). The essential elements necessary in order to form a contract are described as the agreement (offer and acceptance), consideration, capacity, and legality (Mallor, Barnes, Bower, & Langvardt, 2010). The first element necessary to a contract is the agreement. This stage of the contract process constitutes two essential factors that are important to the process. The factors involved in the agreement are the offer and the acceptance of the offer. There are three requirements considered in a court of law when distinguishing the validity of an offer or the acceptance of an offer. The first requirement considered when deciding upon the authenticity of an offer or the acceptance of it is present intent to contract. Present intent to contract is a requirement for the agreement to be official so that people are not unwittingly entered into a contract that was not meant to be real (Mallor, Barnes, Bower, & Langvardt, 2010). In other words, this condition is in use to ensure the offeror or offeree was not joking when making the offer or agreeing to it. However, it is important to note that the acceptance of the offer must objectively indicate a present intent whereas the intent to make an offer does not require objective indication (Mallor, Barnes, Bower, & Langvardt, 2010). The second requirement considered in the legitimacy of an agreement is the definiteness of terms. This prerequisite is also in place to ensure that an individual was not tricked into a contract. However, this requirement examines the specifics of the offer whereas intent to contract looks at the offerees intent to enter a contract with the offeror. If the offer is lacking in specifics, it is likely that it will not be considered an actual offer (Mallor, Barnes, Bower, & Langvardt, 2010). In order for the acceptance of the offer to be upheld, the details of the

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acceptance must directly match the offer. The last requirement examined is communication to offeree. Communication to the offeree is necessary to the authenticity of the offer and the acceptance of the offer. Both sides must express acceptance to the terms and conditions of the offer in order for the offer and acceptance of the offer to be considered valid (Mallor, Barnes, Bower, & Langvardt, 2010). The offer will not be considered valid if the agreement is not expressed to the offeror directly and vice versa. It is important to note that a unilateral contact requires the offeree to perform the desired act before a contract can be made (Mallor, Barnes, Bower, & Langvardt, 2010). The next element essential to the contract process is consideration. The requirement of consideration means that the promisee must provide the legal value agreed upon to the promisor in order for the promisee to force the promisor to provide services agreed upon (Mallor, Barnes, Bower, & Langvardt, 2010). Consideration will not support a promise if the promisor did not ask for anything, asked for something that held no legal value, or asked for something they were legally obligated to do anyway (Mallor, Barnes, Bower, & Langvardt, 2010). An example of consideration not upholding in a court of law can be seen in the case of Collins vs. Godefroy. Godefroy said he would pay Collins (which was subpoenaed) six guineas to testify at court (Lawiki, 2009). However, after Collins testifies, Godefroy refused to pay (Lawiki, 2009). When in front of the jury, Godefroy claimed there was no consideration as he was obligated to go to court anyway (Lawiki, 2009). Other elements necessary to the implementation of a contract are the capacity to contract and the legality. Capacity to contract refers to the ability of the parties to take on legal responsibilities and thus the ability to enter a contract (Mallor, Barnes, Bower, & Langvardt, 2010). Lack of capacity refers to one of the persons inability to form a contract. This includes

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minors, mentally impaired individuals, intoxication, and even inexperience (Mallor, Barnes, Bower, & Langvardt, 2010). Any one of the above factors will allow the individual to discontinue any contract made if they wish. Determining the legality of the contract is also an important step in the process of a contract. If the agreement is found to be illegal in some way, the agreement is void at the very least.

ELEMENTS OF A CONTRACT References

Mallor, J.P., Barnes, A.J., Bowers, T., & Langvardt, A.W. (2010). Business Law: The ethical, global, and ecommerce environment (14th ed.). Lawiki, C. (2009, October 21). Collins v Godefroy . Retrieved from http://lawiki.org/lawwiki/Collins_v_Godefroy_(1831)