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What makes a valid contract?

On Behalf of | May 10, 2022 | Business Law |

A contract breach can be a serious disruption for businesses which makes it helpful to understand what is considered a breach and what the remedies for a breach of contract are. To better understand that, it is helpful to understand what makes a contract valid in the first place.

Elements of a contract

There are several elements of a valid contract. To begin with, there needs to be an offer to enter into a contract. This can include an offer for goods or services. Following the offer, the second element of a valid contract is acceptance. The offer must be accepted and the offer and acceptance must mirror one another so that it is clear the parties intend to enter into a contract. The contract details should be specific and the acceptance must be voluntary.

Another component of a valid contract is valid consideration. Consideration includes the exchange of something of value but it does not have to be money. The parties must also have legal intent to enter into the contract which means that they both intend their contract agreement to be binding. The subject matter of the contract must also not be illegal.

Lastly, the parties to the contract must both be competent. Legal competency means that they are of legal age to enter into a contract, have mental capacity to understand what they are signing and are not impaired at the time of signing.

Protecting a business

All of these components are required for a contract to be valid. When a valid contract has been breached, it is helpful to know how to resolve contract disputes and how parties to the contract can protect themselves in contract breach situations.