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Elements Of A Contract Essay

1546 words - 7 pages

Elements of a Contract
BUS 670
August 25, 2015

Elements of a Contract
Introduction
A contract is a legal agreement between two entities that creates obligations by both parties that are enforceable by law. As Verkerke (2015) notes, individuals are often ill-informed of the legality of most common dealings in their lives. With a common ignorance of legal matters, it is essential that contracts contain the required elements to be legally binding and protect both parties involved. Additionally, it is pertinent to understand the difference between contracts governed by common law and those governed by the Uniformed Commercial Code (UCC). Finally, prior to signing a non-compete ...view middle of the document...

For example, under common law, the acceptance of an offer must meet the mirror image rule; meaning any deviation from the offer would be considered a counteroffer and not an acceptance (Seaquist, 2012). In this case, the two parties are still involved in preliminary negotiations and have not entered a contractual agreement (Seaquist, 2012). The mirror image rule does not apply under the UCC. Under the UCC, the offeree may change the terms of the offer and not affect the contract (Seaquist, 2012). Seaquist (2012) further notes:
If the parties are not both merchants, the new terms in the acceptance become a proposal that the offeror may accept or reject. If the parties are both merchants, the new terms automatically become part of the contract unless the offeror objects or states that the offer can be accepted only in mirror image fashion. (p. 144)
Therefore, the governance of the contract (common law or UCC) significantly affects the wording and enforcement of said contract.
Consideration is the required third element of every contract. Consideration is the determining factor between a contractual agreement and a gift (Seaquist, 2012). “To have consideration means that the promise by the promisor gets the promise to do something he or she was not previously legally bound to do.” (Seaquist, 2012, p. 144). An example is that if Bob gives Mary an engagement ring on the premise that they will get married, and Mary decides to break off the engagement and keeps the ring, Bob can sue her for the cost or return of the ring. Likewise, a gift could be described as Bob proclaiming to Mary, “I am giving you a ring for your birthday!” If Bob fails to follow through, this is not an enforceable promise. However, if Bob told Mary that he would get her a ring for her birthday if she painted his house, then they would have an enforceable contract.
The fourth element of a contract is capacity. Capacity refers to the mental state of the parties entering the contract; thusly a person lacking the mental capacity fails to have the adequate understanding of the consequences to enter a contract (Seaquist, 2012). Individuals who have been adjudicated insane (non compos mentis), have been incapacitated by a disease such as Alzheimer’s or habitual drunkards lack the mental capacity to enter into a contract and may only do so through a legal guardian (Seaquist, 2012). Additionally, a minor who enters a contract may elect to terminate their contractual agreement making the contract voidable (Seaquist, 2012). The avoidance of said contract by a minor is referred to as disaffirmance (Seaquist, 2012). When the minor reaches majority, (age 18) they may wish to ratify any contracts entered prior to and avoid disaffirmance (Seaquist, 2012). Furthermore, upon ratification of a contract the person is fully responsible for fulfillment of all obligations of the terms of the contract (Seaquist, 2012).
The final element of a contract is that of legality; the...

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