The Requirements of a Valid and Enforceable Contract— Agreement

What Is an Agreement? What Does It Require? When Will a Lack of Agreement Void a Contract?

Contracts are an essential component for virtually every business. In fact, it’s not uncommon for your business to enter into multiple contracts on a daily basis. In this series of blogs, we will take a closer look at the five elements that must be present to create a binding contract:

• Agreement
• Consideration
• Volition
• Capacity
• A legal purpose

Let’s examine the legal concept of agreement.

What Is Agreement for the Purposes of a Contract?

Agreement essentially means that the parties to the contract have a similar or mutual understanding of the key components of the contract. It has been described as “mutual assent,” as well as a “meeting of the minds.” As a general rule, that common understanding involves an “offer” and an “acceptance” of that offer.

What Is An Offer?

The offer must be specific enough that the person to who it is made will fully understand his or her rights and responsibilities upon acceptance. The offer must also be such that a reasonable person would expect, upon acceptance, to be bound by its terms. Some types of are generally invalid, such as offers made in jest or offers that could not reasonably be completed. For example, an offer to manufacture a billion units of a product in a day would likely not be enforceable.

When Is There Acceptance of an Offer?

An acceptance will only create a valid and enforceable contract if it states the same terms and conditions as set forth in the offer. If the acceptance materially changes the terms and conditions, it will be considered a rejection of the original offer and an counteroffer (a new offer that may be accepted or rejected).

Can an Offer Be Withdrawn?

Yes, but only if the offer has not yet been accepted. If the person to whom the offer was made has verbally communicated acceptance, a valid contract will be formed (unless the terms of the offer require written acceptance). A written acceptance will be valid when all necessary steps have been taken to communicate it to offeror. For example, if the acceptance is mailed, it will be valid when it is placed in the mailbox, not when it is received by the person making the offer.

Contact MCIS Law

At MCIS Law, PLLC, in Stafford, we provide comprehensive counsel to businesses and business owners throughout southeast Texas, handling all matters related to business formation. For a confidential consultation with an experienced and knowledgeable lawyer, email us or call our office at (346) 297-0121. We accept all major credit cards.