1 offer. An offer may be oral or written, provided it is not required in writing by law. It is the defined expression or an open action that initiates the contract. It is simply what is offered to another in exchange for that person’s promise to act. It cannot be ambiguous or unclear. It must be expressed in terms that are specific and certain, such as the identity and nature of the object that is offered and under what conditions and/or terms it is offered.
2. Acceptance. As a general proposition of law, the acceptance of the offer made by one party by the other party is what creates the contract. This acceptance, as a general rule, cannot be revoked, nor vary the terms of the offer, nor alter it, nor modify it. Doing so turns the acceptance into a counter offer. Although this proposition may vary from state to state, the general rule is that there are no conditional acceptances by law. In fact, by making a conditional acceptance, the recipient is rejecting the offer. However, the offeror, at his choice, by act or word that shows the acceptance of the counter offer, may be bound by the conditions offered by the recipient.
3. Consideration. The consideration in a contract may be money, or it may be another right, interest, or benefit, or it may be a detriment, loss, or liability assigned to another person. The consideration is an absolutely necessary element of a contract. As a caveat, it should be noted that the consideration must be expressly agreed to by both parties to the contract or must be expressly implied in the terms of the contract. Potential or incidental benefit or harm alone would not be construed as a valid consideration. The consideration must be explicit and sufficient to support the promise to do or not to do, as appropriate. However, it does not need to have a particular monetary value. Mutual promises are adequate and valid considerations for each of the parties as long as they are binding. This rule also applies to conditional promises. For further clarification, the general rule is that a promise to act that you are already legally bound to make is not sufficient consideration for a contract. The courts determine the application.
4. Capacity of the Contracting Parties. The general presumption of the law is that all persons have the capacity to contract. A person who is trying to avoid a contract would have to claim his lack of capacity to contract against the party who is trying to enforce the contract. For example, he would have to prove that he was underage, declared incompetent or drunk or drugged, etc. This is often the most difficult burden of proof to overcome due to the presumption of one’s ability to contract.
5. Intention of the Contract Parties. It is a basic requirement for the formation of any contract, whether oral or written, that there must be a mutual consent or “agreement of minds” of the parties on all proposed terms and essential elements of the contract. Courts have held that there can be no contract unless all parties involved intend to enter into one. This intention is determined by the external actions or actual words of the parties and not only by their secret intentions or desires. Therefore, mere negotiations to reach a mutual agreement or assent to a contract would not be considered an offer and acceptance even if the parties agree to some of the terms being negotiated. Both parties must have intended to enter into the contract and one cannot have been deceived by the other. That is why fraud or certain errors can make a contract voidable.
6. Object of the Contract. A contract is not enforceable if its purpose is considered illegal or contrary to public order. In many jurisdictions, contracts based on lotteries, dog racing, horse racing, or other forms of betting would be considered illegal contracts. However, in some states these types of contracts are valid. Federal and some state laws make contracts that restrict trade, price fixing, and monopolies illegal. Therefore, a contract that violates those statutes would be illegal and unenforceable. This is true for drugs and prostitution or any other activity if it is considered criminal.