Generally a Contract must have the following elements to be valid: A valid and binding agreement. This means there must be a valid offer and there must be acceptance of the offer.
5 Requirements for a Contract, this are :-
1. The Offer :-
The offer is the "why" of the contract. This section states what a party agrees to either do or not to do upon signing the contract. The offer must be clearly stated so that all parties understand what the expectations are. For example, a real estate contract will say that one party is buying the property from the other party. The property is identified by address and perhaps also by the county assessor's parcel number.
2. Consideration for Agreement :-
Consideration is what one party will "pay" to complete the contract. Payment is a loose term when defining consideration in a contract, because what a party gets for signing the contract isn't always money. So while a real estate contract might say the property will change hands for 10 thousand as the consideration, a tenant may get a place to live for the consideration of improvements to the property while living there. Ultimately, consideration is considered something of value and usually, it's a defined monetary amount.
3. Legal Intent :-
This requirement for a contract refers to the intention of each party. The contract terms must adhere to the laws and regulations in the state where the contract exists. If legal intent doesn't exist, the contract is not valid or legally binding. An example of a contract that would not meet the legal intent requirement is if a person signs a contract to rob a bank. Robbing a bank is not a lawful action and thus the contract does not have legal intent.
4. Competent Parties :-
Those signing the contract and entering into the contract agreement must be competent. This means that they are of legal age to sign a contract that is 18 years of age; they have the mental capacity to understand what they are signing that is sound mind; and they are not impaired at the time of signing -- meaning they are not under the influence of drugs or alcohol. Although "competent parties" is a requirement for any legal contract, it is highly checked in contracts dealing with senior citizens or disabled persons. A person suffering from dementia might not be mentally competent to sign a contract to sell his property to another party.
5. Acceptance of Offer :-
Acceptance of the offer occurs when the parties sign the document, agreeing to the terms of the contract. Acceptance must be voluntary. This means that a person who signs a contract when a gun is pointed directly at him is legally not able to accept the offer, because he is under duress. This is an extreme example but there are situations in which one party is being blackmailed or threatened in other ways so that he is unable to complete and sign the contract. These are not legally binding. The parties must be mutually bound and agree to the terms of the contract without outside factors influencing the acceptance of the offer.
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