ELEMENTS OF A CONTRACT | Law 101: Fundamentals of the Law (2023)

To be valid, a contract must generally contain all of the following elements:

  • Offer
  • Acceptance
  • Consideration
  • Legality


Contracts always start with an offer. An offer is an expression of a willingness to enter into a contract on certain terms. It is important to establish what is and is not an offer. Offers must be firm, not ambiguous, or vague. A person who is making the offer is called the offeror.

Invitation to Treat: Offers are different than an invitation to treat. An invitation to treat is not an offer. When you list your home for sale, you are not making an offer; you are making an offer to treat. You are inviting potential buyers to make an offer to you to buy your home. The same is true with most advertising. The stores are making an offer to treat. They are expressing their willingness to sell you something if you offer them their asking price. However, they are not bound to accept your offer. For example, you place an ad online to sell your automobile for a certain price. Someone makes an offer to buy the automobile from you at full price. Do you have to accept their offer? No. You are making an offer to treat, and you are not bound to accept their actual offer to buy your automobile.

(Video) Elements of a Contract

Puffery: Advertisers often use puffery to promote their products. So, was the advertising slogan “Red Bull Gives You Wings” meant to be a true statement or puffery? In a class action lawsuit filed on Jan. 16, 2013, in the U.S. District Court of the Southern District of New York by Benjamin Careathers, Mr. Careathers claimed he had been drinking Red Bull since 2002. His lawsuit argued that Red Bull mislead consumers about the superiority of its products starting with its slogan “Red Bull gives you wings” and its claims of increased performance, concentration, and reaction speed. Red Bull eventually settled the lawsuit for 13 million dollars. Red Bull maintains that its marketing and labeling have always been truthful and accurate, and denies any and all wrongdoing or liability.”


Courts will determine whether a statement in advertising is false versus puffery by using the “reasonable person” standard. In other words, would a reasonable person believe the exaggerated statement in an advertisement is meant to be true? It is hard to imagine a jury would find that the Red Bull advertisement that by drinking their product one would grow wings was anything but puffery.

Counter-Offers: A counter-offer negates the original offer. It alters the original offer, and by doing, so releases the person making the original offer from any obligation. For example, A makes an offer to treat regarding the sale of A’s automobile for $10,000.00. B offers A $9,000.00. If A accepts this offer, B is bound to purchase the vehicle for that price. A does not have to accept B’s offer and is not bound to. However, A then makes a counter-offer to B that A will sell the vehicle for $9,500.00. B is not bound to buy the vehicle for that price, but A is now bound to sell the vehicle to B for that price if B accepts the counter-offer.


Acceptance by the offeree (the person accepting an offer) is the unconditional agreement to all the terms of the offer. There must be what is called a “meeting of the minds” between the parties of the contract. This means both parties to the contract understand what offer is being accepted. The acceptance must be absolute without any deviation, in other words, an acceptance in the “mirror image” of the offer. The acceptance must be communicated to the person making the offer. Silence does not equal acceptance.

(Video) Basic Elements of Every Contract - For Beginners


Consideration is the act of each party exchanging something of value to their detriment. A sells A’s automobile to B. A is exchanging and giving up A’s automobile while B is exchanging and giving up B’s cash. Both parties must provide consideration.

Past Consideration: Voluntarily doing something for someone is not consideration. A sees B’s lawn needs to be cut so A voluntarily does so. B comes home from work and is so pleased that B gives A $30 for cutting the lawn. The following week A cuts B’s lawn again without B asking A to do so. A now asks B for $30 for cutting the lawn and B refuses to do so. A claims they have a contract since A has provided consideration by mowing B’s lawn, even though it was voluntary. A is incorrect. B is not obligated to provide consideration to A. There is no contract. However, if B had asked A to mow the lawn, but did not set the price, A would probably be able to enforce the contract after mowing the lawn because B requested he does so.

Performance of an Existing Duty: If a person has a duty to do something, such as a public servant, the performance of the duty is not consideration.

Promissory Estoppel: In some instances, one party is not providing consideration but is relying on a reasonable promise made by another. A party that is induced to action based on a reasonable promise may be able to enforce the promise under the legal theory of promissory estoppel.

This is explained in the Restatement (Second) of Contracts[1] § 90. Promise Reasonably Inducing Action Or Forbearance:

(Video) Contract Law - Introduction & Offer Part 1

(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
(2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.

For example, A works for B who has promised to provide A retirement benefits if A works for B for 25 years. After A is employed with B for 15 years, B tells A that the retirement benefits will now be half the amount originally promised. A can enforce the original promise under the theory of promissory estoppel even though A has provided no consideration. A can make the case that A was induced and acted on this promise.


The fourth required element of a valid contract is legality. The basic rule is that courts will not enforce an illegal bargain. Contracts are only enforceable when they are made with the intention that they are legal and that the parties intend to legally bind themselves to their agreement. An agreement between family members to go out to dinner with one member covering the check is legal but is not likely made with the intent to be a legally binding agreement. Just as a contract to buy illegal drugs from a drug dealer is made with all the parties knowing that what they are doing is against the law and therefore not a contract that is enforceable in court.

Lack of Mental Capacity: The capacity to enter into a contract may be compromised by mental illness or intellectual deficiency. Issues of dementia and Alzheimer’s can blur the lines of competency to sign a contract. Competency to enter into a contract requires more than a transient surge of lucidity. It requires the ability to understand not only the nature and quality of the transaction but an understanding of its significance and consequences. If a person is found to lack the mental capacity to enter into a contract, then the contract is not automatically void but it is voidable.

Minors and Contracts: Minors under the age of 18 years old are allowed to sign contracts, but they are voidable at the minor’s election. The exception to this rule is that contracts for necessities are not voidable. Necessities are general goods or services necessary for subsistence, health, comfort, or education. The burden to prove a contract is for necessities for a minor is on the plaintiff. Minors can affirm their contract made while a minor formally or by actions upon reaching the age of 18.

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Contracts That Must Be In Writing: As already mentioned above, not all contracts have to be in a written format. However, some absolutely do, or they are voidable. Under the common law doctrine of the “Statute of Frauds,” which has been codified in the General Obligations Law (GOB), contracts for the purchase of real property (GOB § 5-703), contracts that cannot be performed in less than 1 year, and contracts that guarantee the debt of another (co-signers) (GOB § 5-701) must all be in writing. It is important to understand that just about any form of writing is acceptable. A handwritten contract to purchase real property on a napkin is acceptable if all the elements of a contract are met. The use of email and text messages may also be acceptable under GOB § 5-701(4).

UNILATERAL VERSUS BILATERAL CONTRACTS: Most contracts are bilateral, meaning both parties are in agreement and the four basic elements of a contract exist. For example, B offers to buy A’s automobile for a specific price and A accepts the offer and agrees to give B the automobile upon receipt of those specific funds. Both parties are agreeing to the contractual arrangement. It is bilateral. In a unilateral contract, one party is making an offer and promise if someone does something in return. There is no agreement necessarily between two individuals as there is in a bilateral contract. However, an offer is made and if another individual accepts the offer and performs, an enforceable contract exists. An example would be if A offers a reward of $100 to the person who finds and returns A’s missing cat. If B finds and returns the cat to A, A would be bound to pay B the $100 reward. This is a unilateral contract.


Gifts are very similar to contracts, but they are different. Gifts do require an offer, acceptance, and delivery of the gift, but are generally not enforceable. If A promises to give B a birthday gift but fails to do so, B cannot enforce the promise. There is no consideration provided by B. However, B is also in no worse position than before the promise was made. From a legal standpoint, if a party does not follow through with the promise of a gift, the parties are in no worse position because of it, and therefore there is no cause of action.

  1. (The Restatement (Second) of the Law of Contracts is a legal treatise often cited by judges and lawyers regarding the general principles of contract common law. It is one of the most recognized and cited legal treatises in American law.)


What are the 7 elements of contract? ›

For a contract to be valid and recognized by the common law, it must include certain elements— offer, acceptance, consideration, intention to create legal relations, authority and capacity, and certainty. Without these elements, a contract is not legally binding and may not be enforced by the courts.

What are the essential elements of contract explain each element very clearly? ›

What are the essential elements of a contract? There are 7 essential elements an agreement must have to be considered a valid contract. The elements of a contract include identification, offer, acceptance, consideration, meeting of the minds, competency and capacity, and legality.

What are the 10 elements of contract? ›

Elements of a Contract
  • Offer. All contracts start with an offer. ...
  • Acceptance. The second element of a contract is acceptance. ...
  • Awareness. For a contract to be legally binding, both parties must be aware that they are entering into a new agreement. ...
  • Consideration. ...
  • Capacity. ...
  • Legality. ...
  • With action. ...
  • Written contract.

What are the elements of a contract PDF? ›

To be legally enforceable, an agreement must contain all of the following criteria: An offer and acceptance; Certainty of terms; Consideration; An intention to create legal relations; Capacity of the parties; and, Legality of purpose.

What are the 5 basic principles of a contract? ›

The basic elements required for the agreement to be a legally enforceable contract are: mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.

What are the 5 main elements of most contracts? ›

The 5 elements of a legally binding contract are made up of:
  • An offer.
  • Acceptance,
  • Consideration.
  • Mutuality of obligation.
  • Competency and capacity.

What makes a contract legally binding? ›

Generally, to be legally valid, most contracts must contain two elements: All parties must agree about an offer made by one party and accepted by the other. Something of value must be exchanged for something else of value. This can include goods, cash, services, or a pledge to exchange these items.

What is the difference between contract and agreement? ›

A contract is legally binding and enforceable, whereas an agreement may or may not be legally binding. Contracts create legal obligations that must be fulfilled by the parties, while agreements may not create any legal obligations.

What is the main element of contract? ›

Essential elements of a contract

an offer. an acceptance. an intention to create a legal relationship. a consideration (usually money).

What are the elements of contract in law? ›

(1) Contracting parties' consent; (2) subject matter of the contract; and. (3) the cause of the obligation.

What are the 4 elements of contract law? ›

A contract is a legally binding promise (written or oral) by one party to fulfil an obligation to another party in return for consideration. A basic binding contract must comprise four key elements: offer, acceptance, consideration and intent to create legal relations.

What are the 3 most basic elements requirements of a contract? ›

Elements of a Contract
  • Offer - One of the parties made a promise to do or refrain from doing some specified action in the future.
  • Consideration - Something of value was promised in exchange for the specified action or nonaction. ...
  • Acceptance - The offer was accepted unambiguously.

What is not an element of a valid contract? ›

A valid contract requires an offer to be accepted, whereas an invitation to treat is not an essential element of a contract. Whilst an offer can be accepted, an invitation to treat is merely an invitation or willingness to negotiate that one party makes to the other.

What are the 7 basic principles? ›

The Constitution rests on seven basic principles. They are popular sovereignty, limited government, separation of powers, federalism, checks and balances, republicanism, and individual rights. Popular Sovereignty The framers of the Constitution lived at a time when monarchs claimed that their power came from God.

What are the 6 major requirements of a contract? ›

6 Essential Elements of a Contract
  • Offer.
  • Acceptance.
  • Awareness.
  • Consideration.
  • Capacity.
  • Legality.

What are the core principles of contract law? ›

In common law, there are 3 basic essentials to the creation of a contract: (i) agreement; (ii) contractual intention; and (iii) consideration. 3. The first requisite of a contract is that the parties should have reached agreement.

What are the most important terms of a contract? ›

No contract is valid unless it contains three essential elements: (1) the names of the "parties," (2) the "subject matter," and (3) "consideration." Each of these terms is defined below.

What makes a contract void? ›

A contract may be deemed void if the agreement is not enforceable as it was originally written. In such instances, void contracts (also referred to as "void agreements"), involve agreements that are either illegal in nature or in violation of fairness or public policy.

What makes a contract null and void? ›

Updated October 7,2020: A null and void contract is a formal agreement that is illegitimate and, thus, unenforceable from the moment it was created. Such a contract never comes into effect because it misses essential elements of a properly designed legal contract or violates contract laws altogether.

What voids a binding contract? ›

Void contracts

Generally, if a contract is void, it's because it doesn't possess all the elements of a binding contract. For example, a court may find that a contract is void if: The contract's terms are illegal or against public policy. The contract's terms are impossible to fulfill or too vague to understand.

Is contract a law or not? ›

(h) An agreement enforceable by law is a contract; (i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract; (j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

What is difference between void and voidable contract? ›

The main difference between void and voidable contracts is that a void contract is invalid from the time it is created. A voidable contract, on the other hand, remains valid until the dissatisfied party cancels the contract if certain conditions are not met.

Is every agreement is a contract? ›

An agreement is the basic structure and when the agreement is legally bounding it becomes a contract, but if it does not include the essentials to form a contract then it can become a void, voidable, domestic agreement.

What is the first essential element of a contract? ›

1 Offer and acceptance

A contract is formed when an offer by one party is accepted by the other party. An enforceable offer must be distinguished from mere willingness by one person to negotiate further details with the other party.

What are the stages of a contract? ›

TL;DR. The stages of contract management can be broken down into pre-signature (creation, negotiation/collaboration, and review/approval) and post-signature (administration/execution, renewal/termination, and reporting/tracking).

What are the 3 C's of the contract? ›

Traditionally, bonding companies have looked closely at the “three Cs:” character, capacity, and capital to qualify contractors for surety capacity.

What are the two primary sources of contract law? ›

The primary sources of contract law include the common law and statutory law. The common law is represented first by the decisions of courts. Second, the common law also includes, with a lesser status than court decisions, the Restatement (Second) of Contracts and books and articles written about contract law.

Is a contract void without consideration? ›

A contract without consideration is void because it is not legally enforceable. "Consideration" means that each party must provide something of value to the other party as designated by the contract terms.

What is unenforceable agreement? ›

Meaning of unenforceable contract in English

a contract that cannot be accepted as legal in a court of law because of a condition that is not legal, information that is not correct, etc.

What are the 8 essential elements of a contract? ›

A valid contract should have all essential elements including offer, its communication, meeting of minds, acceptance, communication of acceptance, consideration, capacity, legality.

What are the 7 key characteristics that must be present for a contract to be enforceable? ›

Contracts constantly vary in length, terms, and complexity. But for an agreement to be legally valid and enforceable, several elements must be fulfilled: Legality, Capacity, Offer, Consideration, Intention, Certainty, and Acceptance.

What are the fundamentals of contract law? ›

According to the Indian Contract Act, 1872 the contract can be in both oral and written form. But as advisable the contract should be in written form to avoid any future crisis. If the contract is in written form then the person is bound to do a certain task but there is a risk in the case of an oral contract.

What are the main elements of a simple contract? ›

The elements of a simple contract are: The parties to it must have intended to be legally bound by it. There must be an offer by one party and an acceptance of that offer by the other party. There must be a valuable consideration.

What 4 basic principles should be considered in the formation of a contract? ›

An agreement must have four essential elements to give rise to a contract and its respective obligations: offer, acceptance, consideration and an intention to create legal relations.

What makes a contract unenforceable? ›

Additionally, there are eight specific criteria a court will use to determine whether or not a contract is unenforceable: lack of capacity, coercion, undue influence, misrepresentation and nondisclosure, unconscionability, and public policy, mistake, and impossibility.

What makes a contract enforceable at law? ›

Intention is the initial stage of contract and even if the element of offer, acceptance and consideration are present, the contract might not be an enforceable agreement if the parties did not have the intention to be legally bound. Once the contract is legally bound, both parties have to follow the agreement.

What types of contracts are enforceable? ›

An enforceable contract is one that can be enforced in court of law. That is, the law allows for enforcement of the contract. An enforceable contract must always be valid. A valid contract may, however, be unenforceable.

What makes a contract invalid? ›

If the formation or performance of the contract will require a party to break the law, the contract is invalid. Examples of contracts with illegal subject matter: Agreement for the sale or distribution of prohibited substances, such as drugs. Contracts to engage in an illegal activity.

What is the difference between agreement and contract? ›

The main difference between agreement and contract is that an agreement is not legally binding and enforceable by law, whereas a contract is legally binding and enforceable by law.

What are the 4 legal elements of an enforceable contract? ›

There are 4 elements of a contract, namely, an offer made by the offeror, an acceptance of that offer by the offeree, intention of the parties to create legal relations and consideration passes between the parties.

What are the three main elements of an enforceable contract? ›

Elements of a Contract
  • Offer - One of the parties made a promise to do or refrain from doing some specified action in the future.
  • Consideration - Something of value was promised in exchange for the specified action or nonaction. ...
  • Acceptance - The offer was accepted unambiguously.

What are the three main parts of most contracts? ›

Contracts are made up of three basic parts – an offer, an acceptance and consideration. The offer and acceptance are what the purpose of the agreement is between the parties. A public relations firm offers to provide its services to a potential client. An electrician offers to wire a new home.


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