Elements of a Contract
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Elements of a Contract

November 22, 2019


Elements of a contract. Before we talk
about the elements of the contract, first we have to understand exactly what a
contract is. And actually a contract it’s very simple. It’s a promise. When you hear
the word contract, think of the word “promise,” but it’s a promise that is
legally enforceable under the law. And if there’s a breach, then the law will allow
a remedy for that breach. So that’s what a contract is. It’s a legally enforceable
promise. Now we’re going to be talking about elements of a contract
here. And another word introductory word here is that different writers, different
textbooks, different legal sources, commentators will will express the
elements of a contract in different ways. So this this is one of the sets of
elements of contracts I think is all-encompassing, and this is the the
list of elements that I teach. First of all first element is going to be
capacity. That means that that the person making the promise has to be of
necessary proper age, usually 18, to be able to lawfully be held to the promise
that they make. There’s another aspect to capacity, and that is this mental element,
that they must be a sound mind. And of course these these two elements relate
to natural persons. When we talk about capacity regarding artificial persons
like in which we call entities like corporations, partnerships, limited
liability companies, so forth and even executors and trustees and guardians and
agents in general, those folks enter into contracts too but we don’t worry
about or concern ourselves with age or mental capacity therefore capacity for
this capacity element, but rather “authority.” Do these people that enter
into the contract on behalf of the corporation or the partnership,
do they have authority? Are they authorized to do that? So that’s our
first element, capacity. Our second element is offer. In fact let’s let’s
just take a quick look at this board. Offer, acceptance, consideration. These
three elements are what are generally viewed as the classical elements of a
contract. But of course we’re adding in this presentation we’re adding
consideration of some other elements as well. So let’s take these one by one. In
addition to capacity on the previous board we’ve got offer, an offer to make a
contract. What’s an offer? Well the Restatement on Contracts says
that an offer is a manifestation of willingness to enter into a bargain,
manifestation of a willingness to enter into a bargain so made as to justify the
other person that their assent is invited. And that if they assent to the
offer, and we’re talking about acceptance here, if they assent to the offer then
that concludes the bargain. They got a deal. So that’s what an offer is. “I want
to do a deal with you.” And you manifest that in some way. All right once you have
an offer then our next element that we look for is acceptance of that offer. And
that acceptance under classical common-law is that that it has to be
unconditional willingness to be bound by that offer; unconditional. And in some
places we even see the the term “mirror-image,” that whatever the
acceptance is has to be a mirror image of the offer, exactly.
The offeror says “I’ll sell you my car for a thousand,” acceptance is “I will buy
your car for $1,000” and that’s mirror image so you have to have that
acceptance. The next element is consideration. Consideration. Say once
again what’s a contract? It’s a promise. Someone’s making a promise. So before
that person is going to be bound by that promise, they
have to, there has to be consideration involved. A person gives a promise, but
they’re receiving something in return for that promise, and that’s something
they’re getting in return for the promise is what we call consideration.
And once you have that consideration in exchange for the promise given, you’re
bound, and you’ve, that’s another element of a contract in place. So you basically
have an agreement at that point. Now even though you have that agreement at that
point you still may not have an enforceable contract. And that’s what
we’re looking at here. All these are elements of an enforceable contract. Our
next one is, you must have a mutual agreement between the people, the parties
of the of this promise, or it could be two promises that are being traded. There
has to be a meeting of the minds. They have to be on the same page. They have to be,
have a perfect understanding of what they’re talking about and be in perfect
agreement. There’s an old English case of one farmer selling what they
thought was a sterile cow to another farmer. They made the deal and then turns
out that the cow was actually pregnant with a calf. And so the question was,
well do we have a contract or not? And the courts ultimately said, no, there was
no contract when the meeting of the minds because they weren’t talking about
the same thing. They weren’t talking, they weren’t involved, they were talking about
a sterile cow when in fact they were promising back and forth and selling
exchanging between them a very fertile animal. So you have to have a mutual,
meeting of the minds, mutual agreement. Everybody on the same page. Legality. The contract has to be legal in all aspects.
First of all in its purpose or subject matter. If I want to make a contract to
to buy fireworks but it’s not the fireworks season and in my particular
jurisdiction, that’s an illegal contract for me to
take delivery of that. Or say alcohol of some kind without having that liquor
license, or if I’m in a in an area that does not allow liquor sales. So it has to
be of a proper has to be legal. What, here’s a silly one, what about a
someone who employs a hitman and the hitman actually turns out to be someone
wired by the police picking up all the all the wheeling and dealing and
then they make the arrest. Well, why can’t the person who wanted the killing done sue
the suppose it hit man for breach of contract for the promises they made? Of
course that’s silly. But it underlines the point the contract
has to be a legal a legal contract; has to be legal in the way is procured. You
can’t procure an otherwise legal contract through bribery because that
that in itself is illegal. And the way you carry out the contract has to be
carried out in a legal way. Once again you can’t use bribery to carry out a
otherwise legal contract otherwise that would would void enforce enforcement of
the contract. Our last element then is proper form. We’re talking about this
contract has to be in writing or can it be an oral contract? Well, generally
contracts can be oral. They don’t have to be in writing
unless they’re certain types of contracts, and I’ve listed a few of these
here where a writing is required. Real property transactions must be in writing.
A contract that’s not going to be performed, it can’t be performed within
one year’s time, that contract must be in writing. And another example would be a
contract where one person guarantees someone else’s debt. They’re going to
pay someone else’s debt for them, be bound by that promise. That has to be in
writing. These documents according to this law, that all states have, they’re
called it’s called the statute of frauds. It’s an old, variation of an old English
statute that says certain types of transactions must be in writing
and they must be signed by the person who’s making the promise, who’s going to
be bound by their promise. Okay. So proper form, and that’s our last element. So to
summarize, here are our elements of a contract: capacity, offer, acceptance,
consideration, mutual agreement, legality, and proper form. And those are the elements
of a contract.

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  1. This video helped me a bunch before my exam tomorrow. Thank you! You should consider organizing your videos into playlists.

  2. Capacity is not an element of contract. Lack of capacity is certainly a viable affirmative defense, but it is nonetheless not an element because the burden of proving a lack of capacity is on the defendant and not part of the plaintiff's prima facie case.

  3. Hi, my name is Alex, I am a law student here in Brazil and I want to write an article about criminal law compared between Brazil and the United States. Can you help me?

  4. Hi Mr. David, how much do you charge in order to be able to retain you to amend a complaint in federal court for a Magistrate Judge.

  5. This was pretty good. It would be nice for someone to put a video about ethics in contracts out there. I personally have seen attorneys ask older people who are not all there to sign legal documents that make changes to financials. At the time I was young, ignorant…unclear what the hell was happening. Looking back now it would be nice for this info to be available for people who need it. Reputable teachers preferable.

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