Question

In addition to agreement, what further two elements are required for the formation of a binding contract?

Answer 1

Agreement covers the offer and acceptance elements of contract binding. Thus the further two elements required for the formation of a binding contract are Consideration and Legal capacity.

1- CONSIDERATION-Consideration is the price paid for the promise of the other party. Considerations that may be exchanged can include, but are not limited to:

• Money.
• Services.
• Tangible items of value.
• Land.
• Stock.
• Promissory notes.
• Intellectual property (IP).
• Mineral rights

The limits on such exchanges is that they cannot be for be for illegal goods, services, or other items of value and they cannot involve criminal activity. Examples include:

• Contracts involving crime.
• Contracts putting limits on consumer protections.
• Contracts that cause interference with family relationships.
• Contracts that excuse a party liability for harm caused by reckless or intentional conduct.

2- LEGAL CAPACITY- Valid contracts involve parties whose judgments are not categorically questioned. The following are groups of people whose consent, and therefore legal capacity, could be challenged:

• People with mental impairments
• Minors (under the age of 18)
• Bankrupts
• Prisoners or people involved in some criminal activity