When conducting business every day, and entering many contracts, it is helpful to understand the basic elements of a contract. Certain elements of a contract must be met for the contract to be valid. The basic definition of a contract is an agreement between parties creating mutual obligations.
The two most basic elements of a contract are that there must be an offer and acceptance of that offer. The offer must be valid and the acceptance must mirror the offer. The offer and acceptance are referred to a mutuality. In addition, adequate consideration is required for a contract to be valid as well as capacity to enter into a contract. Lastly, legality is required which means that no valid contract can be for an illegal purpose.
Consideration is a somewhat complicated legal concept and can either refer to a benefit or a detriment, such as a party forgoing another option, or may refer to a bargained-for exchange. Because of the complexity of contract law, it is usually helpful for business owners to have trained guidance to help them navigate the challenges of contract law and contracts generally.
If a contract dispute arises, knowing the basic elements of a contract, and what is required for a contract to be valid, can come in handy for the business owner. Damages that may be available for a breach of contract can include general damages, consequential damages, reliance damages, liquidated damages or specific performance. Understanding how to properly address a contract dispute can be the difference between preserving a business relationship, opportunity and deal or not which is why all business owners should have an understanding of the basic elements of a contract and contract law.