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The Requirements for a Valid and Enforceable Contract

Business man signing contract document

Most of us enter into some type of contract almost every day…most are oral agreements based on performance. But there are specific requirements for any contract to be enforceable in a court of law.

There Must Be a Bargain

A valid contract requires at least two parties, though there may be more. The law requires that there be an offer and acceptance of that offer. An offer may be oral or it may be in writing, though there are certain types of agreements that are only enforceable if they are in writing (most oral agreements are enforceable). The offer must be communicated to the intended recipient. An offer may be accepted by a promise or by performance of an act.

There Must Be Consideration

Consideration is a legal term that essentially requires that the party either give up something of value or refrain from doing something he or she has a right to do. Often, the consideration is money or the performance of an act—manufacturing or selling an item. But there can be valid consideration if a person refrains from doing something—say, driving or using alcohol—provided the person has a legal right to do that.

The Subject Matter of the Contract Must Be Legal

A contract to perform an illegal act is contrary to public policy and will generally not be enforced by a court.

The Parties Must Have Legal Capacity to Enter Into a Contract

This element requires that both parties understand that they are entering into an enforceable agreement and that they understand the terms of the contract. There are specific conditions that may suggest a lack of capacity. A minor is generally considered to lack the capacity to enter into a contract, although the minor may “reaffirm” the contract after becoming an adult. A person who is under the influence of drugs or alcohol at the time a contract was executed may argue lack of capacity, as may someone suffering from any type of mental illness or incapacity.

The Parties Must Voluntarily Enter Into the Agreement

The courts will typically only enforce contracts where it is clear that the parties knowingly entered into the agreement. Accordingly, if there is fraud or misrepresentation, or if one of the parties used duress or undue influence, a contract may be void.

Contact Attorney Howard N. Sobel

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