The law clearly defines the key elements of a binding contract and those key elements are:
Competent Parties – For a valid contract, each party must have the capacity to enter into it. Capacity may be seen in terms of legal capacity, mental capacity, age, etc. Agreeing to perform an illegal or illicit act is not consideration and the contract is void. A drugged or mentally impaired person does not hold the capacity to enter into any contract.
Minors (e.g., usually those under eighteen) cannot, generally, enter into a binding contract without parental consent, unless it is for the necessities of life, such as food, clothing, or for student loan contracts.
Consideration – A contract is always based on mutual exchange. One must give something of value in exchange to the other party in agreement with you. The value or the compensation is mostly expressed in terms of money, however it can be anything even property.
Mutual Assent – Both the parties must be clear in all the clauses of the agreement and there should not be any element of doubt before signing the contract. Meeting of the minds sometimes can be expressed by words spoken or gestures made or can be inferred from the surrounding circumstances. There is no mutual assent: (1) one side is obviously joking or bragging, (2) there is no actual agreement (i.e., the farmer who is selling a gelding and the buyer thinks the horse is a brood mare), or (3) both sides have made a material mistake as to the terms or details of the contract.
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