Business Post Contributor
By Benita Ayo
Contracts are essential parts of a business and, if handled by highly skilled legal professionals, will save a business and its owner from liabilities emanating from lawsuits.
Contract Defined
In essence, a contract is an agreement between two or more parties who intend to be bound by the terms of the contract so entered into.
In another way, a contract may also be defined as an agreement between parties which creates mutual obligations that are enforceable by law.
As soon as the finer and final details of a contract are concluded, agreed upon and executed (which in the business world is known as “the ‘i’s are dotted and the ‘t’s are crossed), all the parties to that contract are forbidden from walking out of it except on exceptional circumstances recognised by the law.
What are the Elements of a Valid Contract?
As stated earlier on, a contract creates a binding obligation upon the parties to it. What brings about the bindingness is what constitutes the elements of a valid contract, as they are those conditions that give rise to the contractual obligations in the first place.
Now those elements are;
- Offer
- Acceptance
- Consideration
- Intention
- Capacity
Offer
This is the premium ingredient that constitutes a valid, legitimate and binding contract, for without it, no contract will arise. In essence, an offer is an invitation from one party to another to enter into dealing with him in return for a benefit known as consideration.
The offer must be made or stated in such a way that would lead a reasonable person to expect a binding contract to arise from the acceptance of the offer.
Acceptance
This means assenting or agreeing to the terms of an offer and it may be conveyed in any of the following ways;
- Express Acceptance
- Implied Acceptance and
- Conditional Acceptance.
Consideration
This is something of value exchanged between the parties to a contract. It could be money or any property of ultimate value.
Intention
The presence of this essential element of a valid contract purports that all parties to the contract have the complete and absolute free will to partake in the binding agreement. It also signifies that none of the parties to the contract were forced into the contract.
The parties whose intentions are clear and unequivocal have agreed to be bound by the terms of the contract.
Capacity
Capacity to contract means a party has the legal ability to enter into a contract. Capacity also means a person has to be competent as defined by law. Someone’s capacity is determined by whether or not they have reached the age of majority and if they are mentally capable of understanding the applicable contract terms.
Legal Implications of the Elements of a Valid Contract
The elements of a valid contract, as enumerated above, are so vital in every contractual transaction that where there is an absence of any element, any contract so entered into will be rendered null and void.
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Benita Ayo is a Seasoned Corporate Commercial Counsel with over 9 years of post-call experience. She has handled myriads of briefs in Corporate/Commercial, Employment Law as well as Property Transactional Practice.
