Contracts are at the heart of most business relationships. Therefore, it is important to know what makes a contract valid.
A valid contract will generally contain several elements. Understanding the different elements of a valid contract could help business owners determine when there’s been a breach of their agreement.
In essence, a contract is a legally binding agreement outlining the responsibilities one party owes to another. Outlined below are the key elements of a valid business contract:
There must be an offer
A business contract typically contains an offer for goods and services to be provided.
There must be an acceptance of the offer
The recipient of the offer must accept it. The link between offer and acceptance generally displays a meeting of the minds, showing that both parties knew what they were agreeing to.
There must be a consideration
The next crucial element of a valid business contract is a consideration. Consideration stands for the value that each party stands to gain because of the agreement. Often, this refers to money, but this is not always the case.
The contract should contain written terms and conditions
Business contracts should be written even though it’s not mandatory. These written documents should contain terms and conditions. Also, any valid contract must fulfill a legal purpose for it to be enforceable.
Contracting parties must have legal capacity
All parties who are subject to the agreement must have the legal capacity to enter into a contract. Often, this refers to a person’s age, but it also means that contractors should not have been subjected to the undue influence of others. If any of the above conditions are violated, then there may be a breach of contract.
Understanding the elements that validate a contract could help with your business negotiations. Furthermore, if you feel that there’s been a breach of your agreement, it’s important to know what legal rights and protections you have.