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When two parties enter into a legally binding agreement, it is called a contract. The contract must also contain the following elements; offer and acceptance, intention between the parties to enter into legally binding relations, consideration paid for the promise, legal capacity for the parties to act, genuine consent between parties and legality of the agreement. Miller & Jentz describe a contract as “ legally binding agreement between two parties that creates an enforceable obligation” (pg 209).

A valid business contract has some elements that make it complete and whole. These are an offer, acceptance, consideration, legal capacity and legality. The first element of a valid business contract is offer. This is a definite promise that must be bound if the offer terms are accepted. It is also considered an acceptance to enter into a bargain as a way of demonstrating to the other party their desire to enter into the same bargain and finalize it.

Acceptance takes place when the other party on the other end of the offer agrees to it through a statement or an act. This must be unequivocal and communicated to the actual offer, or the law does not consider it an acceptance to the offer merely because the other party did not reject it.

Consideration is the actual promise’s price to the other party. It must be “of value, right, or forbearance undertaken by one party and potentially leading to the other party in the circumstances surrounding an offer” and contract for that matter (Gitman & McDaniel, 2009). The only exception to this rule of consideration occurs in cases of documents under seal. They do not require consideration for there to be a binding contract.

Not all people can enter into legally binding contracts. Any contract such people enter into or create are considered to be subject to a problematic consent and dealt with in special ways. These people who lack the capacity to enter into legally binding contracts include; those with mental impairment, minors who are below the age of suffrage, those declared bankrupt, prisoners and corporation acting on behalf of others.

The element of legality in valid business contracts does not arise simply from the willingness between the parties to enter into an agreement. The will to enter into a legally binding agreement must be present. While this is not explicitly stated, it is deduced from the conditions surrounding the contract’s formation.

Breach of contract entails an unjustifiable inability to perform on all or part of the contractual duty. Gillies (2004) states “this is caused by non-performance on one side of the parties or it interfering with the other party” (pg 231). Breach of contracts is either actual or anticipatory. Actual breach of contracts involves one party failing to perform his side of the bargain, or fulfilling his side of the contractual terms. Anticipatory breach of contracts involves one party stating their intentions of not meeting the contractual terms on a date before the due contract-execution date.

The Statute of Fraud is the requirement stipulating that some contracts be recorded in writing and signed. In addition, there must be sufficient content put on record to evidence these contracts. Statute of Frauds apply in special cases, these are; during marriages, when the contract cannot be performed within one year, transfer of interest in land, contracts involving the executor of a will paying off debts incurred by the estate with his own money, and the sale of goods exceeding 500 US dollars.

The “relationship between elements of a contract and Statute of Frauds is in the consideration of the individual circumstances surrounding both” (Friedman, 2009). The elements of a contract are the building blocks of the Statute and are used in applying and resolving disputes arising from contractual agreements –such as breach of contract.

Contractual statement for the sale of a used Chevrolet Camaro

This is a contract made between the seller, Mike and the buyer, Jim for the sale of the seller’s 2008 Chevrolet Camaro.

The vehicle is a fairly used, red, 2008 Chevrolet Camaro in good condition. The interior is clean, but the exterior shows signs of normal usage, such as few scratches and dents on the body work. It is a functional convertible sports car with good mileage and signs of good maintenance as indicated in the vehicle’s records.

The VIN number HV34777GH99 and the odometer read 45896miles as of 12th November, 2014.

The date of sale is 12th November 2014.Buyer agrees to pay the seller the purchase price of US $ 600 to be paid in cash.

The car is sold “AS IS”. The seller makes no warranties about the condition of the car.

Seller will provide the buyer with the vehicles title and DOT inspection certificate.

…………………………………… ………………………

Seller Date

…………………………………… ………………………

Buyer Date

…………………………………… ………………………. .

Witness Date


Friedman, J. W. (2009). X. In Contracts (p. 54). New York: Aspen Publishers.

Gillies, P. (2004). Vitiating elements: Mistake. In Business law (p. 231). Sydney: Federation Press.

Gitman, L. J., & McDaniel, C. D. (2009). The future of business: The essentials. Mason, OH: South-Western Cenage Learning.

Miller, R. L., & Jentz, G. A. (2008). Contracts: Nature, Classification, Agreement and Consideration. In Business law today: The essentials : text & summarized cases : e-commerce, legal, ethical, and international environment (p. 209). Mason, OH: Thomson/West.