Here. Straight from the horse’s mouth.
Contract Law
Most people in our society are involved in contractual agreements of some kind. In most, if not all, aspects of law contracts can be found. Contracts are involved in family law, corporate law, employment law, litigation and real estate.
Elements of a Contract
A contract is an agreement reached after sufficient consideration to do, or refrain from doing, some legal action. A contract is considered valid when two or more parties with capacity make an agreement involving valid consideration to do or to refrain from doing some lawful act. If these elements exist, the contract is valid. If one or more or these necessary elements is missing, the contract is void or voidable. In other words, it is not a true contract and therefore cannot be enforced.
A void contract is no contract at all. It is not binding and no action can be maintained if it is breached. A disaffirmance is not necessary to avoid a void contract.
If a contract can be rejected by one of the perties on legal grounds, it is called a voidable contract. A voidable contract is valid and binding unless the entitled party (the party wha has legal grounds to reject the contract) voids it. A defect exists. The defect may be cured by ratification of the entitled party.
The three basic components of a contract are the offer, the consideration and the acceptance. The following are six elements that are to help to determine whether or not the basic components ar present and meet legal criteria for a valid contract:
1. All parties must have capacity to enter the contract.
2. An offer must be made.
3. Consideration must be exchanged.
4. The parties must be in mutual agreement.
5. The contract’s object and purpose must be legal.
6. The form of the contract must meet the legal requirements.
Capacity to Contract
The ability to know and understand the terms of contract is known as capacity. For a contract to be valid, all parties must have capacity. Corporations and most adults have capacity. Minors, mentally incompetent persons and those who are intoxicated do not have capacity.
Most states consider persons under the age of 18 to be minors. Minors lack capacity to enter into a contract. If they do enter into a contract, the contract is generally considered voidable. They have the right to cancel the contract at any time before reaching the age of 18. If, however, a minor cancels the contract, the benefits that he or she received must be returned.
If a person is so mentally incompetent that he or she fails to understand that a contract is being made and further does not understand the terms of the contract, that person is said to lack capacity to enter into a contract. If such a person enters into a contract, the contract may be deemed voidable or possibly void.
In the same way, if persons are so intoxicate that they cannot understand that they’re entering into a contract, and are so impaired that they fail to understand the terms, they too lack capacity. These contracts can also be considered voidable or void.