COR - Elements of an Enforceable Contract (Lesson)

Introduction

Contracts are necessary in our personal lives as well in all areas of business. It is important for the consumer and business professional to know and understand contractual relationships. Oftentimes, individuals enter into agreements without considering all that is necessary to form an enforceable contract. This microlesson will introduce you to the elements of a contract as well as significant characteristics of the contract process.

Elements of a Contract

The purpose of a contract is to formalize an agreement between two or more parties. Most all of us have entered into some form of a contract – even if you didn’t realize a contract was taking place at the time. A contract does not have to be the product of a long, formal process such as rental of a property, buying a vehicle, or an entrepreneur receiving funding from a bank for a new business. If you have purchased gas for your car, you entered into a contract with the store providing the gas. When you purchased a video game from a department store, you entered into a contract with that store. You create a contract any time you agree to exchange things of value. In the two prior examples, you exchanged money for both gas and a video game, with the intent you would be able to use both for the purpose in which you made the purchase. Because contracts are such an important aspect of our lives, it is very important that you know about and understand the nature, purpose, and basics of contracts.

A contract is an agreement enforceable by law. You should never enter into a contract without understanding the legal responsibilities involved. An agreement is not a contract unless it contains the necessary primary elements of a contract. In order to be legally complete, a contract must include all the necessary elements.

Review the presentation below for more specific information on the elements of a contract.

Let's Review!

Take a moment to participate in the following activity to practice your understanding of the topics in this module.  Reach out to your instructor if you have any questions.

Final Thoughts

A contract is an agreement enforceable by law. A contract can take many forms. A contract can be written or oral. For a contract to be legal, it must include these primary elements: offer, acceptance, agreement, consideration, capacity, and legality.

As you become an adult you will continue to find yourself in situations that will require you to enter into contracts. The older you get the more complex the contracts are likely to be. It is critical to continue to study and become more and more knowledgeable about the processes of contracts.

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