Basic Elements of a Contract

In simple terms, a contract means an agreement between two or more people. There are different - express or implied contract, unilateral or bilateral and quasi contracts. But, not all agreements can be considered as legally binding and enforceable contracts. How is it decided whether the contract is legally binding or not? A contract must have certain basic elements, so as to be enforceable before a court of law.

Legal Definition of a Contract

A contract can be defined in simple words, as an agreement between two or more parties. Legally speaking, a contract is a voluntary agreement between two or more parties that creates a duty on each of them to do or refrain from doing something, which is the subject matter of the contract and a right to performance of the other's duty, in case of breach of that duty. Contracts can be written or oral. While it is mandatory for some types of contracts like sale of real property, to be written, others can be oral or written. But, written agreement with the signatures of the concerned parties are always preferred, especially, those crucial contracts that involve hefty amounts. This enhances the legal enforceability of the contract, as there is evidence for the terms and conditions that are agreed upon.

What are the Basic Elements of a Contract

So, a contract must have certain basic elements, in order to be legally binding on parties and enforceable before a court of law. The following are some of the basic elements of a deal.

• According to contract law, competency of the parties to a contract is very important. In general, people above the age of eighteen are considered to be competent for entering a contract.
• Another basic element is the voluntary mutual agreement to form the contract. The decision made by each party must be voluntary and not forceful or coercive. In other words, there must be a meeting of minds between the parties to a contract.
• One of the basic elements of a contract is the definite offer from one party and the acceptance of the offer by the other party. Without an offer and acceptance, a mutual consent is not possible.
• Consideration is one of the important factors of a contract. It can be defined as the profit of gain of one party or the loss or the disadvantage or cost incurred by the other, through the implementation of the contract. A consideration can be monetary (in terms of money) or some other benefit.
• Another basic element of a contract is the legality of the subject matter of the contract. In other words, a contract cannot be made on an activity that is illegal in that region.

The above said is only a brief overview about the basic elements of a contract. There can be mild variations as per the laws of different regions or with different fields of law. Apart from the above said, it is always better to have a written agreement that states all the terms and conditions of the contract. It must also state the remedy for the injured party, in case of breach of contract. In case of breach of contract, the aggrieved party can approach a court of law seeking remedy. The aggrieved party can prove that the contract is valid, as all the basic elements are there in it. He/she must also prove the breach of contract elements. If there is a written contract, then, it will be easier for the aggrieved party as well as the court to enforce the contract. However, there are various other factors that are applicable, while deciding the enforceability of a contract. Presence of all basic elements of a contract is only one among them. Others include laws that are applicable to that contract and type of contract.