What are the four elements of a valid contract? Businesses and consumers alike need to know before anyone signs on the dotted line because these elements will come into play should the agreement turn sour. From signing up for a cell phone plan to brokering a multi-million dollar merger, contracts are a legally binding method of exchanging promises to fulfill certain actions. A valid contract should have four elements to it:
At least two separate parties entering into an agreement. The agreement can be between two individuals, between an individual and a company or between a company and another company.
The parties are qualified to agree to the terms and conditions in the contract. The parties must be of legal age and have full understanding of what the contract is and the details it outlines.
Both parties are receiving consideration, or value, from the agreement. This is most commonly money in exchange for a good or service, but there are other methods of consideration, especially in the business arena.
The contract is created for legal activities. Contracts are not binding or considered legally valid when they propose illegal activities or violate existing laws in any way.
Breach Of Contract
A party who has agreed to a valid contract can be held in breach of that agreement in a court of law. When one party seeks legal recourse against another for breach of contract, that party must re-evaluate the contract based on the four elements. These elements are essential in showing that one party did not live up to his end of a valid contract. The plaintiff must prove that:
The contract was valid. In court, the plaintiff will attempt to prove that all the elements that went into making the contract met the validity requirements.
One party did perform according to the contract. The plaintiff must show that the other party did not complete the contract, while proving that the plaintiff did abide by the contract.
The other party failed to perform according to the contract agreement. The plaintiff will have to show that the other party failed to meet the basic contractual obligations.
Damage was incurred. The plaintiff must show that damage occurred as a result of the other party's breach of contract. This could mean loss of money, assets or other quantifiable items.
What constitutes breach of contract? When someone isn't holding up his end of the bargain, these tips can help you figure out if your case will stand up in court.
What is a verbal contract? These types of contracts are spoken but not written down. Although there is no record, verbal contracts are still enforceable.