Contract Requirements

To have a valid contract that is enforceable in court, you need four required elements:

1. Offer & Acceptance. A contract begins with an offer, where one party makes a proposal that includes specific terms. The other party must say “yes” somehow to indicate they agree. An offer can be accepted in writing, in person, over the phone, or by actions that clearly communicate that the accepting party agrees to the offeror’s terms. Once the offer is accepted, then you have an agreement. A person who agrees under duress (some kind of threat) is not agreeing voluntarily so their acceptance would not be valid.
2. Consideration. Consideration is the exchange of value. Value can be an exchange of money for property or services or an exchange of property and/or services as long as both parties receive a measurable benefit. The thing of value could be not doing an act. For example, sometimes when an employee is terminated, the employer will offer a severance payment but only if the employee agrees to not sue the employer for things that happened while working, such as discrimination or sexual harassment. The employee gets some money while the employer values knowing the employee can’t take them to court in the future.
3. Legal Capacity. The parties must be at least 18 years old and of sound mind. A minor who signs a contract has the right to cancel it. A person with mental illness or an intellectual disability and cannot understand the consequences of an agreement does not have the legal capacity to enter into a contract. Similarly, a person who is impaired by drugs or alcohol to an extent that they don’t understand what they are doing lacks legal capacity.
4. Legality. The contract must be for an activity that is legal. Courts will not enforce a contract to commit a crime, such as contracts to commit murder or sell drugs, for example.

If any one of these elements is missing, a contract may be voided, releasing the parties from their obligations.