What You Must Have to Enforce an Agreement

The Requirements of a Valid ContractWhen you own or operate a business, it’s critical that you be able to enforce the agreements you have with customers, suppliers and others. As contract law has evolved, there are specific elements (or requirements) necessary to enforce a contract in a court of law.


For a contract to be valid, there must be agreement among all the parties. Typically, that means there must have been an offer and an acceptance. The offer need not be in writing (with some exceptions, covered by what is known as the “statute of frauds”). The offer, however, must be such that a reasonable person would consider it a legitimate offer to enter into a binding contract. The terms of the offer must be specific enough that the person accepting the offer will know his duties and rights. In most instances, the offer is a promise to perform in exchange for another promise to perform—what is known as a bilateral contract. However, you can exchange a promise to perform for the actual performance of an act (a unilateral contract). For example, you may offer a reward for the return of a lost animal. That’s a promise in exchange for an act—a promise to pay to anyone who returns the animal.


Consideration simply requires that each party to the agreement either give something of value or refrain from doing something they have a legal right to do. A gift is not a contract.


All parties must voluntarily enter into the agreement. A party may seek to invalidate a contract by showing fraud or misrepresentation, duress or undue influence.


All parties to a contract must have the legal capacity to enter into the agreement. That means they must understand that it’s a legally binding contract and understand their rights and obligations under the agreement. Factors that may bring legal capacity into question including mental illness, intoxication and age (minors typically have the right to disaffirm/void a contract).


The parties to a contract may not agree to engage in any act that is illegal or contrary to public policy.

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