You may know that a contract is an agreement between parties that sets out terms and conditions relating to an arrangement. Do you know what makes it legal?
When entering into a contract, you want to ensure it can hold up in court. Thus, it needs to contain seven elements that make it a valid agreement. Check out these requirements and the role they play in creating a legal contract.
- The offer
The crux of a deal involves one party (promisor or grantor) extending an offer of goods or services to another (promisee or grantee).
- Other party’s acceptance
The second prong of the agreement is the acceptance of the offer by the promisee. By accepting the offer extended, the promisee agrees to fulfill the duties assigned.
- Price or consideration
A valid contract has to have a price or consideration attached. Some states have laws regulating the lowest amount allowed. In some instances, the consideration is $1.
- Proof of competency
The parties must demonstrate that they agree to execute the agreement under the laws of the state they live in and that they possess the mental capacity and minimum age (18) to do so.
- The mutual consent of the parties
Agreements need to ensure everyone understands the terms and conditions. The mutual consent section reiterates that the parties have the approval of the other to enter into the contract.
- The legal terms
A contract is not worth much if it does not contain the details of the agreement. This is where the parties set out what it is they plan to do. It makes up the majority of the document.
- Contract execution
While a court may consider an oral contract legal, a written contract is best. The last stage of a valid contract involves the signatures of the parties.