Elements of Contract

For a contract to be legally binding and enforceable, it must comprise several essential elements. These elements ensure that the agreement is made with genuine intent, mutual consent, and legal consideration, creating a fair and structured relationship between the involved parties.

An offer is the initial step in forming a contract, where one party, known as the offeror, proposes specific terms to another party, the offeree. This proposal must be clear, definite, and express the offeror's intention to be bound by the terms if accepted by the offeree. The offer must be communicated effectively, ensuring that the offeree is fully aware of the terms and conditions. Offers can be verbal or written and must outline all essential terms, such as price, quantity, and time of performance. Importantly, an offer can be revoked at any time before acceptance unless it is an irrevocable or firm offer. For example, a company might offer to sell 100 units of its product to a retailer at a specific price, laying out the terms of delivery and payment.

Acceptance is the offeree's agreement to the terms of the offer, thereby forming a contract. For acceptance to be valid, it must be unequivocal and communicated to the offeror. This means the offeree must agree to all the terms of the offer without modification. Any change to the terms would constitute a counteroffer rather than acceptance. Acceptance can be expressed through words, actions, or conduct that clearly indicates agreement. For example, a retailer might accept a company's offer to purchase 100 units of a product by sending a confirmation email agreeing to the specified terms.

Consideration is the value exchanged between the parties in a contract. It is what each party gives up to gain the benefits of the contract. Consideration must be something of legal value, which can be a promise to perform a certain act, or a promise to refrain from doing something one has the legal right to do. This mutual exchange is essential for a contract to be enforceable. For instance, in a contract for the sale of goods, the buyer's consideration is the payment of money, while the seller's consideration is the transfer of ownership of the goods.

Intention to Create Legal Relations
For a contract to be valid, there must be an intention among the parties to create legal relations and be legally bound by the contract. This intention is typically presumed in commercial agreements, as parties entering into business transactions usually intend for their agreements to be enforceable by law. However, in social or domestic agreements, the presumption is generally that the parties do not intend to create legal relations unless clearly stated otherwise. For example, a business contract between a supplier and a retailer inherently carries the intention to create legal relations and be subject to legal scrutiny.

The capacity to contract refers to the legal ability of the parties to enter into a contract. Certain individuals, such as minors, mentally incapacitated persons, or intoxicated persons, may lack the legal capacity to form binding contracts. Additionally, corporations and other entities must have the authority under their governing documents to enter into contracts. A party without legal capacity can void a contract, making it unenforceable. For example, a contract signed by a minor for non-essential items can generally be voided by the minor.

The final element of a valid contract is legality. The purpose and subject matter of the contract must be legal and not against public policy. Contracts that involve illegal activities, such as drug trafficking or fraud, are void and unenforceable. Additionally, contracts that contravene public policy, such as those that impose unreasonable restraints on trade, are also considered illegal. For example, a contract for the sale of stolen goods would be illegal and thus void, offering no legal recourse for either party involved.

In summary, a valid contract requires the presence of several key elements: offer, acceptance, consideration, intention to create legal relations, capacity, and legality. Each of these elements plays a crucial role in forming a binding agreement that is enforceable by law.
Back to blog
UOL Case Bank

UOL Case Bank

Upon joining, you become a valuable UOL student and gain instant access to over 2,100 case summaries. UOL Case Bank is constantly expanding. Speed up your revision with us now.

Subscribe Now

Where are our students from?

Yale University
Council of Europe
Baker Mckenzie 
University of Chicago
Columbia University
New York University
University of Michigan 
University College London (UCL)
London School of Economics (LSE)
King’s College London (KCL)
University of London
University of Manchester
University of Zurich
University of York
Brandeis University
University of Exeter
University of Sheffield
Boston University
University of Washington
University of Leeds
University of Law
Royal Holloway, University of London 
Birkbeck, University of London
SOAS, University of London
University of Kent
University of Hull
Queen’s University Belfast
Toronto Metropolitan University
Hong Kong University of Science and Technology
University of Buckingham

  • Criminal Practice

    Diagrams and Charts

    Our carefully designed diagrams and charts will guide you through complex legal issues.

  • Criminal Law

    Clear and Succinct Definitions

    Key concepts are concisely defined to help you understand legal topics quickly.

  • Property Law

    Statutory Provisions

    Statutory provisions are provided side by side with legal concepts to help you swiftly locate the relevant legislation.

  • Public Law

    Case Summaries

    We have summarised important cases for you so that you don't need to read long and boring cases.

  • Evidence

    Rules and Exceptions

    Rules and exceptions are clearly listed so that you know when a rule applies and when it doesn't.

  • Company Law


    Legal terms and key concepts are explained at the beginning of each chapter to help you learn efficiently.

  • Case Law

    Case law is provided side by side with legal concepts so that you know how legal principles and precedents were established.

  • Law Exam Guide

    Law Essay Guide

    You will learn essential law exam skills and essay writing techniques that are not taught in class.

  • Law Exam Guide

    Problem Question Guide

    We will show you how to answer problem questions step by step to achieve first-class results.

  • Conflict of Laws

    Structured Explanations

    Complex legal concepts are broken down into concise and digestible bullet point explanations.

  • Legal System and Method

    Legal Research

    You will learn legal research techniques with our study guide and become a proficient legal researcher.

  • Jurisprudence and Legal Theory


    All essential concepts, principles, and case law are included so that you can answer exam questions quickly.