Question

In business law, a contract consists in an actionable promise or promises. Every such promise involves two parties, a promisor and promise, and an expression of a common intention and of expectation as to the act or forbearance promised. An agreement enforceable by law is a contract. Every promise and every set of promises, forming the consideration for each other, is an agreement. When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. Thus, ‘’contract’’ is a bilateral transaction between two or more than two parties. Every contract has to go through several stages beginning with the stage of negotiation-discussion-counter proposals, as also the consideration, and finally acceptance of the proposals. Under law it is not necessary that every contract must be in writing.
In view of the aforesaid, discuss the essential elements of a contract in business law.

Answer 1

The below are the essential elements of a contract in business law:

a. Offer: In contract law an offer typically means a promise one party makes in turn expecting another party’s performance. This can either be monitory benefits or anything valuable in exchange for performance. An offer becomes a real offer only when it is received by the offeror. The offeror has the right to revoke or take back an offer at any time prior to acceptance.

b. Acceptance: When an offer is made by the offeror acceptance takes place when the offeree agrees to receive something for performance and agree to all terms of the contract. The agreement must be agreed without any condition or any changes which is known as mirror image rule.

c. Capacity: A contract in order to be legal, valid and enforceable should meet certain requirements like the two parties entering the contract must have the capacity to enter in the contract. Capacity means each party must clearly understand what they are entering into and the consequences in doing so.

d. Consideration: Consideration in contract is all about bargaining a benefit between the parties in order to enter the contract. It must be a value which includes money, promise, property etc which is exchanged for the performance by the other party. It typically includes three steps which is bargaining, mutual exchange and exchange for something valuable.

e. Legal: Any contract has to be legal and not against the public and government policies.

f. Privity of Contract: Privity of contract is a rule which specifies that only directly involved parties in a contract will be able to enforce the terms of the contract which means protecting third parties from interference. A person who is not a party to the contract will not be benefit from it.