Elements of a Contract

Elements of a contract:

Offer and Acceptance:

A contract is formed when an offer by one party is accepted by the other party.

An offer need not be made to a specific person. It may be made to a person, a class of people, or to the whole world.

Acceptance occurs when the party answering the offer agrees to the offer by way of a statement or an act. 

An offer is a definite promise to be bound, provided the terms of the offer are accepted.

Intention to create legal relations:

For example, offering a friend a ride in your car is not usually intended to create a legally binding relation. You may, however, have agreed with your friend to share the costs of travelling to work on a regular basis and agree that each Friday your friend will pay you $20 for the running costs of the car. Here, the law is more likely to recognise that a contract was entered into.

Consideration:

Consideration is the price paid for the promise of the other party. The price must be something of value, although it need not be money. 

Legal capacity:

Not all people are completely free to enter into a valid contract. The contracts of the groups of people listed below involve problematic consent, and are dealt with separately, as follows:

* people who have a mental impairment;

* young people (minors);

* bankrupts;

* corporations (people acting on behalf of a company); and

* prisoners.

Not all people are completely free to enter into a valid contract. The contracts of the groups of people listed below involve problematic consent, and are dealt with separately, as follows:

* people who have a mental impairment;

* young people (minors);

* bankrupts;

* corporations (people acting on behalf of a company); and

* prisoners.

Consent:

Entering into a contract must involve the elements of free will and proper understanding of what each of the parties is doing. In other words, the consent of each of the parties to a contract must be...