In order for a business agreement to be enforced, which elements of a contract must exist?

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Karyth Cara eNotes educator| Certified Educator

All four of the elements of a contract must exist in order for a contract to be enforced. These four elements are standard contractual elements in most of the world: offer; consideration; agreement; mutual intent of legality.

An offer of some sort must exist. A consideration (the exchange of something of worth and value for what is offered) must exist as a promise. Agreement must be reached between parties to the contract; they may be no duress or coercion. There must be mutual legal intentionality in which parties recognize legal enforceability of the contract.

pranav2008 | Student


            The law of contract is that branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. The present study is to understand importance of contract and essential elements of a valid contract.


            A contract is an agreement made between two parties which the law will enforce. Every agreement and promise enforceable by law is contract (Pallock). Salmond defined it as an agreement creating and defining obligations between the parties.

Example: A makes an agreement to sell his house to B for $50,000 and B agrees to purchase the house.

Essential elements of Valid Contract

            All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and are not expressly declared to be void. In order to become a contract, an agreement must have the following essential elements:

  1. 1.      Offer and acceptance: There must be two parties to an agreement i.e. one party making the offer and the other party accepting it.
  2. 2.      Intention to create a legal relationship: When two parties enter into an agreement, their intention must be to create legal relationship between them.
  3. 3.      Lawful consideration: An agreement to be enforceable by law must be supported by consideration. Consideration means an advantage or benefit moving from one party to another.
  4. 4.      Capacity of parties:  The parties to the agreement must be capable of entering into a valid contract. The factors like age, sound mind decides the capacity of the parties.
  5. 5.      Free and genuine consent: The consent of the parties is said to be free when they are of the same mind on all the material terms of the contract. The parties are said to be same mind when they agree about the subject matter of the contract in the same sense and same time.
  6. 6.      Lawful object: The object of the agreement must be lawful, it means the object must not be illegal, immoral or flaw.
  7. 7.      Certainty and possibility of law:  The agreement must be certain and not vague or indefinite.
  8. 8.      Agreement not declared void: The agreement must not have been expressly declared void by the law in force in the country.
  9. 9.      Legal formalities: A contract may be made by words spoken or written. It depends upon the statutory requirement whether the contract should be written or oral.


            Contracts play a vital role in the society and business. Contracts are agreements which are enforceable by law for benefit of both parties in it. A contract becomes valid if all the essential elements are fulfilled.


  1. Charles Wild, S. W. (2010). Smith and Keenan's English Law (16 ed.). US: Pearson.
  2. Cheeseman, H. (2009). Business Law (7 ed.). Pearson.