Essential Elements of a Valid Contract

Legally Competent Parties

All parties to the contract must have legal capacity. That is, they must be of legal age and have enough mental capacity to understand the nature or consequences of their actions in the contract. In most states, including Illinois, 18 is the age of contractual capacity.

Legal Purpose

A contract must be for a legal purpose. A contract for an illegal purpose or an act against public policies is not a valid contract.

Offer and Acceptance (Mutual Assent)

There must be an offer by one party that is accepted by the other. The person who makes the offer is the offeror. The person who accepts the offer is the offeree. This requirement also is called mutual assent. Courts look to the objective intent of the parties to determine whether there was intent to enter into a binding agreement. In cases where the statute of frauds applies, the offer and acceptance must be in writing. Proposing any deviation from the terms of the offer constitutes a rejection of the original offer and creates a new offer.

Reality of Consent

a contract must be entered into as the free and voluntary act of each party. Each party must be able to make a prudent and knowledgeable decision without undue influence. If the other party were to sue for breach of contract, the injured party could argue as a defense that the agreement lacked reality of consent.

A contract must meet certain minimum requirements to be considered legally valid. The following are the basic essential elements of a contract....

1) Offer and Acceptance (Mutual Assent) 2) Acceptance 3) Consideration 4) Legally Competent Parties 5) Reality of Consent 6) Legal Purpose

Acceptance

If the seller agrees to the original offer or a later counteroffer exactly as it is made and signs the document, the offer has been accepted and a contract is formed. An offer is not considered accepted until the person making the offer has been noti ed of the other party's acceptance. Presenting and negotiating multiple offers on the same property has the potential for misunderstanding and legal issues for real estate licensees. Licensees must be careful that the seller accepts only one offer. The licensee must transmit all offers, acceptances, or other responses as soon as possible to avoid charges of deliberate delay and possible communication problems. Such speed can be critical to the client's interests.

Consideration

—something of legal value offered by one party and accepted by another as an inducement to perform or to refrain from performing some act. There must be a de nite statement of consideration in a contract to show that something of value was given (or promised) in exchange for the other party's promise. The only requirements are that the parties agree to the consideration and that no undue influence or fraud occurred.