5 elements of a valid contract

Question 1

what are the five elements of a valid contract

Answer 1

consensus
consideration
capacity
legality
intention

Question 2

what is consensus

Answer 2

• offer and acceptance of a contract

Question 3

who is the offeror and who is the offeree

Answer 3

offeror is the person that makes the offer

offeree is the person that accepts the offer

Question 4

end of specified time

Answer 4

when the offeror states a specific time for expiration and after this time it is too late to accept offer

Question 5

what is end of reasonable time

Answer 5

if no specified time is given, the offer ends when reasonable

Question 6

death or insanity of offeror

Answer 6

offer automatically ends

Question 7

revocation

Answer 7

offeror can withdraw their offer at anytime before acceptance

Question 8

rejection

Answer 8

when the offeree communicates a rejection to the offeror

Question 9

what ends an offer

Answer 9

end of specified time
reasonable time
death or insanity of offeror
revocation
rejection
counter offer
option agreement

Question 10

counter offer

Answer 10

if counter offer is rejected by offeror, the offeree cannot go back and accept original offer

another counter offer would be needed

Question 11

option agreement

Answer 11

keeps offer open for a specified time

Question 12

how can an offer be accepted

Answer 12

• commitment by offeree to be bound by terms of offer
• can be signature or handshake
• must be complete and unconditional ( offeree cannot pick and choose which parts to accept)
• acceptance must be communicated

Question 13

invitations to treat vs offer

Answer 13

• an invitation to treat allows the other party to make an offer
• an offer is usually an acceptance or rejection

Question 14

what is the tendering process

Answer 14

• putting a job out to tender ( when a company requires of services from other to put out a request for bids on the job)
• when a bid is submitted, a tender agreement is called
• the acceptance occurs when the party requesting the bid makes a selection from the bid

Question 15

consideration

Answer 15

past consideration is no consideration ( when consideration has already been given prior to the agreement)

• consideration must be included at the time the contract was made for it to be valid

Question 16

capacity ( contracts with infants)

Answer 16

anyone under age or majority

• contract is binding on the adult
• if infant ratifies contract after becoming an adult, they cannot escape the contract

Question 17

capacity ( contracts intoxicated/insanity)

Answer 17

• may escape a contract no non-necessities
• must prove the person was so insane/intoxicated that they did not understand the transaction
• must propose contract as soon as person is sane or sober

Question 18

legality

Answer 18

• contract cannot include unlawful considerations
• must be legal to be valid

Question 19

intention

Answer 19

• parties must intend for the contract to be legally binding

Question 20

presumption of agreements

Answer 20

personal relationships
- presumption is there is no intention to be legally binding

business
- intended to be legally binding