In America, a contract must have the following essential elements:
- Offer
- Acceptance
- Mutual Assent
- Consideration
Offer
An offer means that one party expresses her willing to contract with the other party on certain terms, and once the other party accepts such terms, they will become binding. An offer can be a letter, fax, email, or even conduct. The person making an offer is the offeror.
Acceptance
Acceptance is performed by the offeree. Generally, the acceptance must be communicated; however, communication is not necessarily needed in unilateral contracts. The method of acceptance is usually identified in the contract, but it may be inferred from conduct. Please note that a counter-offer is not an acceptance.
Mutual Assent
Mutual assent is also known as the “meeting of minds.” It means that both the offeror and the offeree agree to the same thing, in the same sense, and at the same time. The objective standard of what parties said and did, not the subjective state of mind, will determine whether a mutual assent exists. In other words, one party may believe that no agreement has ever formed, but in fact the communications and acts will unveil a binding contract.
Consideration
Consideration is something of value bargained for exchange. It can be either a benefit to the promisor/offeror or a detriment to the promisee/offeree. It is not necessarily monetary; it can be a forbearance to act as well. A consideration may not necessarily be of equal value to what it is used to exchange. As long as it is sufficient, its adequacy will have no effect.
Even with the elements listed above, a contract is not binding if its purpose or objective is illegal, or it is entered under duress, or there is a mistake, fraud or bad faith, or the parties to the contract are incapable, or the terms are unconscionable. Besides, although oral contracts are as binding as written ones, the “statute of fraud” may invalidate certain oral contracts. Contract issues can be of great complexity. Therefore, it is necessary to consult with a lawyer when issues emerge.
Lei Jiang Law Firm provides contract and other relevant legal services. If you need more information or help, please contact us.