Contract disputes can create significant disruption for a business. Contracts govern a number of different types of relationships and most businesses are frequently involved in contracts and contractual relationships. The integral nature of contracts to business relationships may lead to important questions concerning how contracts are formed and what to do if one has been breached.
When a party is alleging breach of contract and seeking damages, it must first prove the existence of a valid contract. There are four elements of a valid contract. The first important element of a contract is an offer. The offer is essentially a promise to do something or refrain from doing something made by one of the parties. The next important element of a contract is consideration which is the promise of something of value in exchange for the promised action or non-action by the other party. Consideration can be monetary, however, it does not have to be monetary in nature. It can also be the promise of a service, the promise to refrain from doing something or reliance on the promise made by the other party.
The next important element of a valid contract is acceptance of the offer which must be unambiguous and, in general, mirror the terms of the offer. Finally, the parties must have a mutual meeting of the minds which means that each party understood the terms of the contract and agreed to those terms.
The elements of a valid contract can sometimes be tricky to understand or seem complex. When a contract dispute occurs, it is important for the non-breaching party to carefully understand the elements of the contract so that they can properly enforce the contractual relationship, recover damages or seek the appropriate outcome based on the needs and goals of the company in the circumstances.
Source: The University of New Mexico Judicial Education Center, “ELEMENTS OF A CONTRACT,” Accessed Oct. 1, 2015