Essential Elements of a Legally Binding Contract
A contract can be very simple, but it does have to meet certain minimum requirements to be considered a legally binding contract.
Key Takeaways
If you want your agreement or contract to be legally enforceable, then you have to meet all of the criteria (not just some of them).
At its most basic definition, a contract is an agreement between two or more entities that creates a legal obligation between them to do something or not to do something.
Here are the elements of a legally binding contract:
Offer and Acceptance
There must be an offer and acceptance. In other words, a party must make an offer, and another party must accept the offer. There must be mutuality of obligation. Meaning, both parties must intend to be legally bound by the agreement or contract
Consideration
There must be something of value exchanged for action or inaction. So you can exchange something “for this, for that.” Or, you could exchange something of value to require action or to require some sort of inaction.
Capacity
Each party must be legally able to enter into contracts. For example, a minor can not enter into contracts legally. A minor that enters into a contract, then the contract would not be legally binding or legally enforceable.
Legality
The contract must be for a legal purpose.
If an agreement meets the all of these criteria, then it is legally binding. If it doesn’t, then it is not legally binding. This is key when putting together agreements. You have to meet all of the criteria (not just some of them) if you want the agreement or contract to be legally enforceable.