Overview
The lecture explains that a contract is a legally enforceable promise and details the essential elements required for a contract to be valid and enforceable under the law.
Definition of a Contract
- A contract is a legally enforceable promise between parties.
- Breach of contract allows for a legal remedy.
Element 1: Capacity
- Parties must have legal capacity, typically being of age (18+) and sound mind for natural persons.
- For entities (corporations, partnerships), capacity means having proper authority to enter into a contract.
Element 2: Offer
- An offer is a clear willingness to enter into a bargain, inviting the other party’s assent.
- The offer must be communicated in a way that justifies the expectation that acceptance will conclude the deal.
Element 3: Acceptance
- Acceptance must be an unconditional agreement to all terms of the offer (the “mirror-image” rule).
- Acceptance completes the agreement if it matches the offer exactly.
Element 4: Consideration
- Consideration requires that something of value is exchanged for the promise given.
- Both parties must receive something in return for their promises.
Element 5: Mutual Agreement (Meeting of the Minds)
- Both parties must have a shared understanding and agreement on the contract’s terms.
- No contract exists without a true meeting of the minds.
Element 6: Legality
- The contract’s subject matter and purpose must be legal.
- The way the contract is formed and carried out must also be legal.
Element 7: Proper Form
- Contracts may be oral unless a statute requires writing for certain types (e.g., real property, guaranty of debt, contracts not performable within a year).
- The statute of frauds lists which contracts must be written and signed.
Summary of Contract Elements
- The seven elements are: capacity, offer, acceptance, consideration, mutual agreement, legality, and proper form.