Which of the following is an element of a legally binding contract?

Most of the principles of the common law of contracts are outlined in the Restatement of Law, Second Contracts published by the American Law Institute. The Uniform Commercial Code, whose original articles have been adopted in nearly every state, represents a body of statutory law that governs important categories of contracts. The main articles that deal with the law of contracts are Article 1 (General Provisions) and Article 2 (Sales). Sections of Article 9 (Secured Transactions) govern contracts assigning the rights to payment in security interest agreements. Contracts related to particular activities or business sectors may be highly regulated by state and/or federal law. In 1988, the United States joined the United Nations Convention on Contracts for the International Sale of Goods which now governs contracts within its scope.

Remedies for Breach of Contract -- Damages

If the agreement does not meet the legal requirements to be considered a valid contract, the “contractual agreement” will not be enforced by the law, and the breaching party will not need to indemnify the non-breaching party. That is, the plaintiff (non-breaching party) in a contractual dispute suing the breaching party may only win expectation damages when they are able to show that the alleged contractual agreement actually existed and was a valid and enforceable contract. In such a case, expectation damages will be rewarded, which attempts to make the non-breaching party whole, by awarding the amount of money that the party would have made had there not been a breach in the agreement plus any reasonably foreseeable consequential damages suffered as a result of the breach.  However, it is important to note that there are no punitive damages for contractual remedies, and the non-breaching party may not be awarded more than the expectancy (monetary value of the contract, had it been fully performed). 

However, in certain circumstances, certain promises that are not considered contracts may be enforced to a limited extent. If one party has made reasonable reliance to his detriment on the assurances/promises of the other party, the court may apply an equitable doctrine of Promissory Estoppel to award the non-breaching party a reliance damages to compensate the party for the amount suffered as a result of the party’s reasonable reliance on the agreement.

In another circumstance, the court may award unjust enrichment to a party, if the party who confers a benefit on another party, if it would be unjust for the party receiving the benefit to keep it without paying for it.   

Finally, one modern concern that has risen in contract law is the increasing use of a special type of contract known as "

At some point all business owners have to deal with the process of creating a contract. However, just because you write out a contract doesn't necessarily mean it is legal. There are certain elements that need to be properly expressed in a contract to give it validity. Contracts that are missing these key elements may not be enforceable by law. When creating a contract, it is imperative to ensure that the following four elements are clearly explained.

Details About the Offer

The first element of a valid contract is the offer. This is the promise made by one party in exchange for the other party's promise. A promise can include the intent to perform an action, or to refrain from doing something. Once an offer is made, it creates the power of acceptance in the selected recipient. At this point, the other party can accept or terminate the offer.

A Clear Acceptance

It is important for a contract to show that the offeree fully accepts the terms. Specifically, the offeree must show that he or she unequivocally assents to the terms of the contract. The offeree must also do so in the way specified by the contract. A contract can be terminated if the offeree does not accept in a reasonable time, or fails to do so in the correct manner.

Sufficient Consideration

Another important aspect of contract creation is consideration. This is a legal term of art that stands for the value exchanged between the parties. Consideration can be monetary in nature, or can be satisfied by the making of a promise. Contract preparation problems can arise when the amount of consideration is insufficient. Courts look to see if there is a legal detriment to the offeree in order to analyze this element. When consideration is lacking, the court may invalidate the contract.

The Parties Intentions

Beyond the offer and acceptance, the parties must demonstrate an intent to be bound by the contract. Essentially, there must be proof that the parties wish to create a legal relationship with each other. This relationship needs to be based on a clear understanding of the terms and obligations involved. Both parties must also enter into this relationship freely. If a party is coerced, or unfairly persuaded, the contract can be unenforceable.

Other Key Aspects

The above elements only cover some of the main aspects of a valid contract. In reality, contract preparation will be a lot more complex. Business contracts should be prepared by an experienced lawyer who is familiar with business law. An unenforceable contract can seriously hamper your bottom line. Don't take risks by trying to create contracts on your own. Contact a reputable law firm, such as T.R. Spencer Law Office, for professional assistance in contract matters.

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