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Legal Definition and Basic Elements of a Contract

Sonia Nair
A contract must have some basic elements that make the deal valid and legally binding. This write-up provides a brief overview about these elements.
In simple terms, a contract means an agreement between two or more people. There are different types of contract, like express or implied contract, unilateral or bilateral and quasi contracts.
All agreements cannot be considered legally binding and enforceable. How is it decided whether the contract is legally binding or not? A contract must have certain basic elements, so that it is enforceable before a court of law.

Legal Definition of a Contract

A contract is a voluntary agreement between two or more parties, that creates a duty on each of them to do or refrain from doing something, and a right to performance of the other's duty, in case of breach of that duty.
Contracts can be written or oral. While it is mandatory for some types of contracts, like sale of real property, to be written; others can be oral or written.
However, written agreements with signatures of the concerned parties are always preferred, especially, in case of crucial contracts that involve hefty amounts. This enhances the legal enforceability of the contract, as there is evidence for the terms and conditions that are agreed upon by the parties.

Basic Elements of Contract

So, a contract must have certain basic elements, so that it is legally binding on parties, and enforceable before a court of law. The following are some of the basic elements of a contract.

Competency of Parties

According to contract law, competency of parties to a contract is very important. In general, people above the age of 18 are considered competent for entering a contract.

Voluntary Mutual Agreement

Another basic element is the voluntary mutual agreement to form the contract. The decision made by each party must be voluntary and not forceful or coercive. In other words, there must be a meeting of minds between the parties to a contract.

Offer and Acceptance

One of the basic elements of a contract is the definite offer from one party, and the acceptance of the offer by the other party. Without an offer and acceptance, a mutual consent is not possible.


Consideration is another important factor of a contract. It can be defined as the profit of gain of one party or the loss or the disadvantage or cost incurred by the other, through the implementation of the contract. A consideration can be monetary or some other benefit.

Legality of The Subject Matter

Another basic element of a contract is the legality of the subject matter of the contract. In other words, a contract cannot be made on an activity that is illegal in that region.
This is only a brief overview about the basic elements of a contract. There can be mild variations as per the laws of different regions or with different fields of law. It is always better to have a written agreement that states all the terms and conditions of the contract.
It must also state the remedy for the injured party, in case of breach of the contract. In case of breach of contract, the aggrieved party can approach a court of law seeking remedy.
The aggrieved party can prove that the contract is valid, as it has all the basic elements. He/she must also prove the breach of contract elements. If there is a written contract; it will be easier for the aggrieved party as well as the court to enforce the contract.
However, there are various other factors that are applicable, while deciding the enforceability of a contract. Presence of all basic elements of a contract is only one among them. Others include laws that are applicable to that contract and the type of contract.