Essential Elements of a Contract

12/04/2020 1 By indiafreenotes

The 7 essential elements of a contract are the offer, acceptance, meeting of the minds, consideration, capacity, legality, and sometimes a written document.

Contract Basics

Contracts are legal agreements between two parties or more. Legally binding contracts must have essential elements in order to be enforced in court. Some contracts that are missing one or two of these essentials will still hold up in a court, but it’s best to have them all covered.

A contract is made basically any time one entity offers something to another and the offer is accepted. Think of the last time you accepted a job offer. The company offered you a job and you accepted, therefore a contract was formed. Employment contracts are one of the most common types of legal agreements.

Contract Classification

  • Usually, the types of contracts you’ll come across in the business world are classified as simple contracts. These can be made:
  • In writing
  • Verbally
  • With action

Bilateral contracts are one of the basics where both parties act to uphold the agreement. If one person promises something to someone else and that person agrees to give something in return, they’ve entered into a bilateral contract. When a product or service is sold and the customer provides payment, the company selling the item and the customer entered into a bilateral contract.

Unilateral contracts are agreements where one party promises something in return for the action of the other. If you’ve even returned a lost dog for a reward, you’ve entered into a unilateral contract. The dog owner paid you a reward for the action of finding their pet.

Deeds are required to be handwritten and sealed with the signatures of both involved parties under the witness of a third party. These include agreements like:

  • Transferring land
  • Mortgages
  • Conveyances


First, an offer must be extended in order to begin a contract. This should include details of the agreement and its terms and conditions. Simply put, the offer is the offeror’s attempt at entering into a contract with another.

Sometimes businesses will look for contractors through an invitation to treat by letting people know that they are interested in entering into a contract.


Once the offer is extended, it’s in the hands of the offeree to either accept or reject the proposal and its terms and conditions. Offerees can accept offers via mail, email, or verbally.

Most states use the mailbox rule meaning that, if an offer is accepted via mail or email, the moment the acceptance is placed in a mailbox to be mailed or sent via email, it has officially been accepted. This holds true even if the offerer never receives the acceptance. Within this acceptance, there needs to be a clear statement that the terms of the agreement are all accepted.

Meeting of the Minds

The meeting of the minds in contract law refers to the moment when both parties have recognized the contract and both agreed to enter into its obligations. This is also called:

  • Genuine agreement
  • Mutual agreement
  • Mutual assent
  • Consensus ad idem

Even after the parties have entered into the contract, it can be voided a few different ways including duress, undue influence, fraud, or misrepresentation.


Something of value must be exchanged in order to have a valid legal agreement. Usually, things like products, property, protection, or services are offered for the exchange of money.

If not trading in money at all, the parties should be sure that the court would view whatever they are trading, also called their consideration, as valuable.


Each party must be fully able or have the legal capacity to enter into the contract in order for it to be considered valid. For instance, you cannot enter into a legal contract with a three-year-old. Both parties must be of their right mind in order to form a contract, so a valid agreement could not take place if one of the parties is under the influence of any mind-altering substance.

This also includes the desire of both parties to enter into the agreement free from coercion.


Contracts cannot be created to govern the trade of illegal products or services. A drug dealer cannot enforce a contract with their buyer if their buyer doesn’t pay them.

Each party must show legal intent, meaning that they intend for the results of their agreement to be completely legal.