The Elements of a Contract

Almost every day of our lives we sign and agree to contracts. Whether it’s buying goods online, paying for groceries at the store, or purchasing a new car, contracts make the business world go round. While contracts play a major role in our lives, many are not familiar with the exact components that make up their contractual rights.  

Definition of a Contract: Bilateral Exchange of Promises

First and foremost, a traditional contract is a bilateral exchange of promises. It is either a promise in return for a promise or a promise in return for an action. For instance, if I promise to wash your car and you promise to give me $10 then we have both exchanged promises. However, before contract formation there must first be assent by both parties for the contract to be deemed enforceable. Assent is the intention to enter the contract and is based on both objective and subjective factors. Without assent there can be no contract.

Secondly, there must be a true offer and consideration in the formation of a contract. An offer is an act whereby one person confers upon another the power to create contractual relations between them. It must lead the offeree reasonably to believe the power to create a contract is conferred upon him and it must exclude invitations to deal, acts of preliminary negotiations, and acts evident in jest. In addition, there must be sufficient consideration with the offer which makes it a bargained for exchange. If there is no consideration than the promise is gratuitous which destroys the contract.

Lastly, there must be acceptance by the offeree to complete a contract. Acceptance is a voluntary act of the offeree whereby he exercises the power conferred upon him by the offer. The offeror is no longer free to change its mind and withdraw from the relationship without incurring liability. Moreover, there can be acceptance by performance of the offer or acceptance through a return promise. Either way, without acceptance the contract ceases to exist.

Because contracts come in all shapes and sizes, having an experienced attorney is incredibly helpful when you are not sure about signing on the dotted line. Whether it’s an individual questioning a recent purchase or a corporation seeking to reorganize, Eric Lanigan and Roddy Lanigan will provide direction and can negotiate or resolve your business litigation or contractual issues.  Lanigan and Lanigan P.L., in Winter Park Florida will protect your contractual rights.