To form a contract, there must be an offer by one party, an acceptance by another party, and an exchange of consideration (something of value). The person who proposes the terms of an agreement makes an offer, and is called an “offeror” in contract law. The person to whom the offer is made is known as the “offeree.” While an offer can be as simple as a one-sentence verbal statement, both parties generally benefit from a more detailed (and written) assessment of the offer and terms.
The purpose of a contract could be the sale of goods, a pledge to refrain from a particular activity, provide services, or a promise to perform a task. But in the most basic sense, a contract is an agreement to perform (or refrain from performing) a given task.
If you were going to paint a building, you’d need some specific information in the contract. You need to have terms to the contract as well. Who, what, when, where and how. You need to look at the terms. Both parties likely would want to know more details about the deal, such as the kind of paint used, the amount need, whether the paint will be purchased in advance, how long the job will take, how many coats are needed, what the price of the job is, and so on.
The terms of a proposed agreement must include enough detail for a person to accept and perform the task or obligation. Generally, and in particular with respect to consumer and commercial transactions, this means that certain material terms must be present in the offer. Material terms typically include the price and the subject of the contract, such as goods or services rendered. Depending on the subject of the contract, the quantity of goods and timeframe for delivery may also be considered material terms. Terms may also include whether a person can accept through promise or performance.
The consideration is the value bargained for by the parties. We call this consideration. Consideration can be anything of value, but it must have some value. Last, but not least, a person must have legal authority to either make or accept a binding offer. This authority is called “capacity.” Generally, a person is presumed to have capacity to make a contract if she is at least 18 years old (so they are of legal age), and of sound mind. They’ve got to know what they are doing or they could claim it was a mistake and try to get out of the contract.
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