The Law in Your Life


What is a Contract?

The following is a general contract law discussion. We have not tailored this area to any specific type of contract, but the general principles of law discussed will be applicable to most legal problems.

While you are reading this section, keep the facts of your specific matter in mind, and much of the information provided will help you understand the legal consequences of the contract issue. Since there are specific issues which may change the outcome of your case, you should consult with an attorney to make certain that your legal position and conclusion is on solid ground.

Whether you have a contract is one of the most litigated issues in the courts. As a rule, you should not make a determination, without the assistance of a lawyer, of whether you actually have a binding contract. An incorrect analysis may subject you to serious damages if you are wrong, and you may end up paying thousands of dollars in damages.

However, there are contracts that we make every day that are not large in dollar amount. In fact, each time we are engaged in any transaction to purchase goods/services, we are likely making a contract. The purpose of this discussion is to help consumers understand what constitutes a contract. By understanding the basics of contracts, consumers can determine if they are on a solid legal ground in any contract dispute. They can also help themselves in taking protective measures to put them on a solid legal ground.


Most contracts are based on common law elements. The elements of most basic contracts are (1) offer; (2) acceptance; and (3) consideration. In determining whether a contract exists, an analysis and understanding of each of the elements is necessary.

Offer. An offer can be made to pay or sell a piece of property, an idea or any item which can be transferred.

So long as the offer is serious and confers a benefit that is not in jest, the acceptance of the offer by a potential buyer would constitute a binding contract, provided the other elements of the contract have been met, i.e. consideration (these elements will be discussed below.)

Thus, you should make certain you give careful thought to the terms of an offer, before making one. Likewise, you should give careful thought to acceptance prior to accepting a benefit offer.

Acceptance. With certain exceptions, contracts can be oral and can be accepted orally. Thus, when you accept, be sure to do so in the same mode as the offer was made, or preferably in writing so a record is made.

Two other actions may affect acceptance: (1) the offer is rejected; or (2) the offer is withdrawn before acceptance.

Rejection. An offer may be rejected in at least two ways: (1) By simply rejecting the offer; or (2) by making a counter offer. Like an offer, a counteroffer, if it confers a benefit, can be legally accepted, and if made prior to withdrawal or rejection constitutes a binding contract. Thus, you should make a counteroffer only if you are willing to have the counteroffer accepted.

Withdrawal. An offer may be withdrawn at any time, so long as the withdrawal is communicated to the potential offeree, the person to whom the offer is made, prior to acceptance by this person.

Consideration. For an offer and an acceptance to constitute a binding contract, there must be valid consideration. Consideration means something of value must be given to one party in exchange for the object of the offer. Otherwise, you have made a gift and gifts can be withdrawn at any time.

Usually consideration is in the form of money, but it can be many things. Courts will usually go out of the way to find consideration. And courts will not measure the adequacy of consideration. That is, they will not determine whether the offeree paid adequate compensation for the item received. So long as there is sufficient consideration, that is, something given up by the offeree, the deal will usually stand.

Mutual Assent. There must also be a "meeting of the minds" or mutual assent, to have a contract. If each party is talking about a different item, then there is no mutual assent, and there is no contract even if all the other items to form a contract are present.

Typical Contract Terms

All of the terms for any contract do not have to be present, or discussed. Just because a particular term does not exist, or was not discussed at the time the contract was made, does not mean the contract is voidable. The court will imply "reasonableness" to determine the meanings of terms which are not present in a written or oral contract.

The limit is that some significant terms must have been discussed, or there may be no "meeting of the minds." For example, usually "price" is a key issue. Generally, if the parties did not discuss the price, or did not agree on a price, courts may not be willing, absent evidence that the price was obvious, to imply a price. Thus, when it is apparent to the court that some terms were discussed, the court may fill in the blanks with a determination of what is reasonable. Be careful not to take the position that a contract can be broken just because one minor item was not agreed to by the parties.


Don't Sign, or Accept, or Offer unless you are serious. Generally, contracts are serious business and cannot be broken, except in very special circumstances.

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