The law of contract is affecting to every transaction between buyers and sellers. Therefore, a contract is considered as an agreement which can be enforceable by law. There are essential elements required for the formation of a valid contract (Allen & Overy, 2013). The five most essential elements of them are as follows.
- Offer and acceptance
The first main element required for a valid contract is the mutual agreement between the seller and the buyer. For a mutual agreement, offer and acceptance should be there. The person who makes an offer called as offeror and the person to whom the offer is made called the offeree. Basically, offeror makes an offer to offeree by expressing his/her willingness to enter into a specific agreement. If an offer is accepted by the offeree, the contract will be formed.
For a valid contract, there must be a consideration which is whatever exchanging between the two parties; offeror and offeree. The consideration is used to persuade offree to enter into an agreement and if there is no consideration, the contract is not considered as a valid contract.
- Capacity to contract
The parties who involve in a contract should have the legal capacity to enter into a contract. Minor people under 18 years do not have the capacity to enter in to a contract except for necessities such as food and clothes. Also people who have not a proper mental capacity and who are under the influence of drugs or alcohol are considered as legally incompetent under the law.
- Consent to contract
The parties involved in a valid contract must completely agree to the provisions in the agreement and they must be willing to enter into the contract. If one party is forced another party in any way to enter into the agreement, the agreement will be not valid.
- Legality of purpose
Under the law, every valid contractual agreement must have a legal objective and if the contract involves anything that is illegal such as stolen goods and murder for hire, it is considered that the contract is invalid.