What Are the Elements of a Binding Contract?Not every agreement between parties is binding in a court of law. In order to be enforceable, contracts require the following elements: - Mutual Assent ¿ this means that the parties involved have a shared understanding as to what the contract covers. For example, in a contract involving a ¿model,¿ if one party thinks the contract is for a model car and the other thinks it¿s for a supermodel, there is no mutual consent and the contract probably will not be enforceable.
- Offer and Acceptance ¿ One party must make an offer, or a communication of the intent to be bound by a contract. The other party must accept, or assent to the terms offered. See also alternatives to acceptance.
- Consideration ¿ the mutual exchange of something of value. Note that even though there may be no mutual consideration, there are rare cases where a mere one-sided promise can be enforced. See detrimental reliance.
What Constitutes Adequate Consideration?In general, a contract is only binding if each party promises something to the other. For example, one party promises a house in exchange for a certain amount of money. Laws concerning adequate consideration may vary by state, but in general: - Consideration can be a promise to do something, like making a payment or performing a service, but it can also be a promise to not do something. For example, a promise to refrain from using bad language is valid consideration.
- Consideration should be of some value. If a party promises to give her friend a house, the friend cannot hand over a wooden nickel and claim to have a binding contract.
- Past consideration is not adequate. If a party promises to pay another party for a service that has already been rendered, there is no adequate consideration and no binding contract.
- Consideration decided upon by the parties is binding, even if it seems unfair or inadequate. In other words, if a party contracts to sell his car for $5,000 when the car is actually worth $30,000, the contract is still binding.
When is a Contract Unenforceable?
Even when the above key elements are satisfied, there may be other reasons why the contract cannot be enforced. For more information, see defenses to breach of contract. Should I Consult an Attorney for my Contract Issues?Contract law is complicated, and the applicable rules and standards may vary from state to state. If you desire to enter into a contract, an attorney can help with proper drafting to provide you with protection later on. |
