Introduction
The formation of a contract must meet some essential element that helps establish a legally valid contract. Suppose when we talk about the crucial features required for forming a contract offer and acceptance. In this process, the offer is given by one party to another party, and that party needs to accept it to make a contract. In the course of formation, the contracting parties decide the terms and conditions with a mutual understanding of the legally binding contract. During the contract formation, the contracting party can make a counteroffer to each other, and they need to accept it after completing that negotiation process. If the parties agree to the terms and conditions, they will spell down all these in writing form and create a contract. With the growth of the economy and the industry sector, the standard form of contract is made in several quantities, and they need to be regulated to protect the rights of the weaker contracting parties. In this article, we point out the basic requirements for making a contract, and also we discuss the essential elements required for the formation of a contract. So, stay tuned and read below;
What are the essential elements required for the formation of a contract?
In the formation process of a valid contract, there are some essential elements required that are given below;
Offer
An offer is one type of promise based on terms and conditions for entering a contract. It is a base for creating a contract; the offer is also known as a promise.
A party that makes an offer is called an offeror, and a party who accepts that offer is called an offeree. The offer can be made to an individual or group of persons.
Let’s see the essential elements needed for a valid offer;
- The offer should be completed and exclusive.
- The offer’s form depends upon the contract’s requirement, e.g., it can be implied or expressed.
- The offer must be valid in legal ways and capable of acceptance.
- It should be offered with the intention that it is legally bound to the parties.
Acceptance
When a person accepts an offer given by an offer, it is called acceptance. There are different ways to accept an acceptance, such as that can be accepted verbally or orally, and the party’s conduct can accept that. The contract is not legally binding to the parties if the offer and acceptance are not matched.
For making a legal acceptance, some basic requirements need to be fulfilled;
- The offeree must be well aware of the offer for acceptance.
- The acceptance must need to reflect the offer.
- The offeree communicates explicitly with an offeror regarding their acceptance.
The offeree must be presented with their acceptance to the offeror within a specific time. After completion of that communication, the contract will become legally binding to the offeree. The contract is not legally binding if any conditions connect with the acceptance.
Consideration
Consideration is a crucial part of a contract. It plays a vital role in its formation. Without consideration, a contract has no legal validity. Here, we should note that the consideration should be lawful. The illegal consideration resulted in a void contract.
Lawful object
The object refers to the subject of a contract. The object of a contract must be required to be lawful. There is no legal validity of an agreement based on an illegal thing or if it comes against public policy.
Free Consent
The contracting parties must have free consent. If any contracting party is involved in the contract by coercion or forcefully, that should not be counted as free consent. And if any contract is made on that basis, it declares a voidable contract in the eye of the law.
The capacity of the party to enter the contract
The capacity of a party is also essential for forming a contract. If the contracting party cannot enter into the contract, that makes the contract unenforceable in the eyes of the law. Some criteria are defined for the party’s capacity under contract law. For example, if a contracting party belongs to an insane drunker, a minor, etc., the contract made between them is void.
Making a counteroffer
When an offeror gives their offer, it must be accepted by an offeree. But in some cases, it happens that an offeree makes a counteroffer. In this way, the offeree can propose new terms or propose changes to existing terms. When a counteroffer is proposed, then the acceptance of the main offer does not exist. However, the first offeror who made the original offer has the right to accept or reject the counteroffer.
Conclusion
When the contracting parties want to enter into a contract, the first step they need to take is forming a contract. This way, the parties must meet some essential elements for making a legally valid contract. For example, the parties must fulfil all the legal aspects such as an offer, acceptance, consideration, capacity of the party, lawful object, terms and conditions of the contract, etc. After completing those aspects, they can make a valid contract that is legally binding to the parties.
Also Read:
What is a Legally Binding Contract Under the Contract Law?
What Is Implied Contract Under The Contract Law?
