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What are the 4 elements necessary in every contract?

Contracts can contain many pages of small print that is not only difficult for you to read, but also difficult for you to understand.

At their core, however, the Legal Information Institute explains that all legally enforceable contracts must contain the following four elements:

  1. Offer and acceptance
  2. Consideration
  3. Capacity
  4. Legality

1. Offer and acceptance

Your contracts must contain one party’s offer or promise to the other party, plus the other party’s acceptance thereof. For instance, you may promise to deliver something to, or do something for, the other party. Your signature and that of the other party on the contract evidence both your offer and the other party’s acceptance of it.

2. Consideration

Consideration means that which the other party promises to do or refrain from doing in exchange for your offer. Usually consideration consists of a monetary payment, but many other things qualify as consideration as well.

Under the bargain-for-exchange theory of consideration, adequate consideration consists merely of your making a promise to the other contract party in exchange for something else. Under the benefit-detriment theory, adequate consideration entails a promise on the part of the other party that benefits you in some way or negatively affects him or her in some way.

Under either theory, your offer or promise specifically induces the other party to make his or her exchange promise.

3. Capacity

Capacity means that both you and the other contract party have attained legal age, usually 21, and have the mental capability to understand what you are agreeing to do or refrain from doing.

4. Legality

It goes without saying that your contracts must have legal purposes. In other words, no court will enforce a contact that calls for criminal behavior or activity on the part of either party.