Contracts
3. Key Elements of a Contract
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 19 Jul 2015
- A valid contract must have all of the following elements:
- an offer setting out the terms a person is willing to be bound to if their offer is accepted;
- acceptance of the offer in its entirety since any part of the offer that is changed is considered a counter-offer rather than an acceptance of the original offer;
- an intention by all the parties to enter into a legally binding transaction; and
- consideration (something given or given up) in exchange for the promise made by the other party.
- All parties to the contract must have the legal capacity to enter into the contract. Contracts made with minors, people who are mentally impaired, bankrupts or prisoners will only be binding in special circumstances.
- All parties to the contract must genuinely consent to entering into the contract. None of the parties should have any misunderstanding as to the terms of the contract or be forced or tricked into signing the contract.
- The subject matter of the contract must be legal in order for it to be enforced in court.
- Certain contracts are considered illegal at common law (the laws developed by judges). Illegal contracts include those that are entered into to commit a crime or fraud, are sexually immoral, a detriment to public safety, obstruct justice, promote corruption or operate to defraud the tax office.
- There is also a category of contracts that are treated as void. This means that the contract is valid but the courts will not enforce it. Contracts can be treated as void by legislation or by common law. The extent to which a contract is made void by legislation will depend on what the legislation says. Contracts that are detrimental to the public good are void at common law.
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