What Four Things Make a Contract Valid?

Contracts sound complex. The might look complex too. You always see comically high stacks of papers, brimming with legalese and stuffed in thin manila folders in the movies. They may intimidate you if a contract of yours has a lot riding on it.

But contracts, at their core, are simple things that have four simple requirements. Knowing how they work at their most basic may help you better understand them at their most complex. The Judicial Education Center discusses these four core elements:

Offer

One party initiates an offer to another. This is a promise to do or refrain from doing something as the start of an agreement.

Consideration

One party offers something of value in exchange for this specified action. This is money or labor, but the quid pro quo aspect of this offer for value is what differentiates a contract from a gift.

Acceptance

The parties involved accept the agreement unambiguously. This comes at the end of several renegotiations and counteroffers.

Mutuality

The parties, through a meeting and discussion of some sort, are mutually aware of the basics of the contract.

And that is it. But while these elements seem simple, they are also easy to get wrong, maliciously or not. Each step provides areas of confusion that either get looked over (in which case a court may determine the contract void) or outright exploited to harm one of the parties (in which case you may wish to pursue a suit for contract breaches or fraudulent agreements).

Knowing how you enter into a contract is step one of a great agreement. Knowing your recourse if things go wrong is step two.