What Is A Contract?: Oral Contracts

What is a Contract?
An agreement between two private parties that creates mutual legal obligations. A contract can
be either oral or written. However, oral contracts are more challenging to enforce and should be
avoided, if possible.
Some contracts must be written in order to be valid, such as contracts that involve a significant
amount of money (over $500). Contracts are part of everyday dealings in all aspects of life.
Therefore, it is crucial to understand the rules governing them to ensure you have a valid
contract.
All valid contracts must include the following elements to be enforced:
 An offer (I will pay you $1,000 for 1,000 cupcakes);

 And acceptance of the offer presented with (Other person accepts $1,000 for 1,000 cupcakes);
 A promise to perform (Other person says they will perform);
 A valuable consideration ($1,000);
 A time or an event of when the performance must be made (1,000 cupcakes exactly 2 weeks
from now);
 Terms and conditions for the performance (The cupcakes must be chocolate and have vanilla
frosting); and
 Performance (The 1,000 cupcakes are delivered and the person is paid $1,000).
On top of that, the courts will not enforce certain contracts unless they are in writing. These
contracts fall under the Statute of Frauds and must be in writing. They include marriage
contracts, contracts not to be performed within one year, interest in land contracts, paying
decedent’s debt guarantees, and sale of goods contracts over a specific amount.
Most contracts are governed by the state statues and therefore it is important to consider the local
laws when dealing with a contract issue.
Contents
What are the Required Elements for a Contract?
There are five elements that are required for any contract. First, the contract must have a legal
purpose and cannot be used for illegal purposes. For example, contracting to commit a crime
(like hiring a hitman). Second, there must be a mutual agreement between the parties. This is
also known as “the meeting of the minds,” one party must have offered an offer to another party
for acceptance. For example, a signing of a contract shows that there is a mutual agreement
among the parties and everyone is on the same page.
Some offers may not have an expiration period, if so then the offer remains open for a
“reasonable” time. Offers can also be revoked until the acceptance occurs. Acceptance usually
means agreeing to the terms of the offer and if there is any change to the terms in the acceptance,
then it would be considered a counteroffer. States differ on this and it would be ideal to consider
the regulations in your local jurisdiction.
Third, consideration is key in order for the contract to be valid. Consideration is when both
parties agree to provide something of value in exchange for a benefit. Consideration can be
something like a car, money, or even manual labor. It has to be something of actual value.
There is also a distinct difference between gifts and promises. For example, if someone gifted
you a handbag it is not considered a contract or even if they promised to give you a handbag and
they did not, there is still no contract. However, a contract exists when the handbag is being
exchanged for completing a task promised to you by a friend. Like, if you clean my gutters then I
will buy you a handbag.
Fourth, the parties must be legally competent. Minors and mentally impaired cannot validly
contract. Additionally, the party must be of a sound mind while contracting and without the
influence of drugs or alcohol. Lastly, all parties must come to an agreement based on their own
will. Contracts will be void if there is a mistake, duress or fraud by one or more parties.
What is Considered a Breach of a Contract?
If either party fails to fulfill the legal obligations under the contract that party has breached the
contract. If one party violates the contract, then the other party will suffer economic losses. For
example, if you hired a construction company to complete a project according to a certain
deadline and that company failed to do so, then you will most likely suffer financial losses
because they failed to keep their end of the deal.
There are several options available to compensate for those losses. You can either sue for
damages, demand specific performance or terminate the contract. In the end, the court will
decide the outcome and the amount of compensation.

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What is a Contract?

All valid contracts must include the following elements to be enforced:

 An offer (I will pay you $1,000 for 1,000 cupcakes);

What are the Required Elements for a Contract?

What is Considered a Breach of a Contract?

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