A contract must meet certain minimum requirements to be considered legally valid. The following are the basic essential elements of a contract:
Offer and acceptance (mutual assent)
There must be an offer by one party that is accepted by the other party. 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. It means that there must be a meeting of the minds, or complete agreement about the purpose and terms of the contract.
In Illinois, the offer and acceptance must be in writing. The wording of the contract must express all the agreed-on terms and must be clearly understood by the parties.
An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree.
Proposing any deviation from the terms of the offer constitutes a rejection of the original offer and creates a new offer. The original offer ceases to exist because the seller has rejected it. The buyer may accept or reject the seller’s counteroffer. If the buyer desires, the process may continue by making another counteroffer. Any change in the last offer may result in a counteroffer until either party reached an agreement or one party walks away.
Any offer or counteroffer may be withdrawn at any time before it has been accepted, even if the person making the offer or counteroffer agreed to keep the offer open for a set period.
Acceptance If the seller:
The licensee must advise the buyer of the seller’s acceptance and obtain the approval of the parties’ attorneys if the contract calls for it. A copy of the contract must be provided to each party.
An offer is not considered accepted until the person making the offer has been notified of the other party’s acceptance.
The licensee must transmit all offers, acceptances, or other responses as soon as possible to avoid questions of proper communication.
Besides being terminated by a counteroffer, an offer may be terminated by the offeree’s outright rejection of it.
Alternatively, an offeree may fail to accept the offer before it expires if a time frame was attached to the offer.
The offeror may revoke the offer at any time before receiving the acceptance. This revocation must be communicated to the offeree by the offeror, either directly or through the licensees who are the parties’ agents. The offer also is considered revoked if the offeree learns of the revocation and observes the offeror acting in a manner that indicates that the offer no longer exists.
Consideration
The contract must be based on consideration. Consideration is 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 definite statement of consideration in a contract to show that something of value was given (or promised) in exchange for the other party’s promise.
Consideration must be good and valuable between the parties.
Good Consideration — Love and affection
Valuable Consideration— Money, things of tangible value (gold, pearls, diamonds)
The courts do not inquire into the adequacy of consideration. Adequate consideration ranges from as little as a promise of “love and affection” to a substantial sum of money. Anything that has been bargained for and exchanged is legally sufficient to satisfy the requirement for consideration. The only requirements are that the parties agree to the consideration and that no undue influence or fraud occurred.
Reality of consent
Under the doctrine of 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. A mistake, misrepresentation, fraud, undue influence, or duress deprives a person of that ability. If any of these circumstances is present, the contract is voidable by the injured party. If
the other party were to sue for breach, as a defense, the injured party could say the agreement lacks reality of consent.
Legal purpose
A contract must be for a legal purpose that is, even with all the other elements (consent, competent parties, consideration, and offer and acceptance). A contract for an illegal purpose or an act against public policies is not 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, 18 is the age of contractual capacity.
