What are the basic requirements for the successful formation of a contract?

Question

What are the basic requirements for the successful formation of a contract?

Answer

Contract formation is very important. If a contract has not been formed, the parties involved cannot be deemed to be under any obligations. Therefore, it is imperative to have a good understanding of the basic elements that need to be present for a contract to be successfully formed.

For a contractual agreement to be legally binding, there are four basic requirements to be met:

1. Offer
   An offer is merely a statement or another form of indication that the individual is ready to enter into a contract with another individual on certain specific terms. The offer must be communicated without further requirements of the person receiving it. It also has to be clear that the offeror is prepared to be bound by the terms once offer is accepted. The offer must not be a mere “invitation to treat” (a general intent), such as displaying goods in a store. In such a situation the offer is made when the customer presents the goods to the cashier.
2. Acceptance
   Acceptance can be indicated in different ways by the offeree. The acceptance must be clear and unequivocal, without conditions attached to it. The acceptance has to be made before the offer has expired and/or before it is withdrawn by the offeror.
3. Intention to Create Legal Relations
   The parties must intend that legal consequences will result from their contractual agreement. This is especially necessary in domestic and social agreements.
4. Consideration
   It is up to the parties to decide whether or not the consideration is adequate. The law only requires that there be sufficient consideration. However, something of value must be given. The consideration cannot relate to something given or promised in the past and it must be a new promise or some new benefit in exchange for the offer.

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