A contract is a legal document between two parties. In order to be enforceable, the contract must contain seven elements. While more specific requirements may differ by state, the basics of contract law require that these seven elements exist regardless of where the contract is formed. If even one is missing, a contract may be voided and the parties will be excused from any obligations.
An offer is the beginning of a contract. One party must propose an arrangement to the other, including definite terms. For example, if the proposal is an offer to purchase shirts, it must include quantity, price and a delivery date. When the offer is communicated to the other party, he has the right to accept, reject or amend the offer. If he rejects it, the offer dies. If he amends the offer, the original offer dies and his amendments become a new counteroffer that the other party can accept or reject.
An offer can be accepted in writing, in person or over the phone. The acceptance must simply be communicated to the offering party, with an obvious declaration that the accepting party intends to be bound by the buyer's terms. Under the "Mailbox Rule" used in most states, an offer is deemed accepted when the accepting party places it in a mailbox or sends an email, even if the offering party never actually receives it.
Consideration is something of value that the parties are contracting to exchange. Generally, one party exchanges money for property or services, but the parties can both exchange property or services, as long as a court would find that each party's consideration has sufficient value.
Competence, also called legal capacity, is a party's ability to enter into a contract. The most common reason for incompetence is age. A party must be at least 18 years old to enter into a contract. If a minor signs a contract, she has the right to cancel it. Another reason for incapacity is mental illness. A person incapacitated by a disease or disability, who does not understand the terms of a contract he entered, has the right to rescind his acceptance of an offer, voiding the contract. Lastly, a person under the influence of drugs or alcohol may be considered incompetent if the other party knew or should have known that the person's impairment affected his ability to understand and freely consent to the contract.
Generally, the law assumes that a competent party freely consents to a contract. However, if consent was obtained on the basis of frayed, due to duress or because of the exercise of undue influence, a party's consent is considered involuntary and the contract is void.
A contract is only enforceable if the activity in the contract is legal. For example, a person cannot contract with someone to commit assault, murder or another criminal act. Additionally, contracts to split lottery winnings in states where gambling is illegal have been delayed unenforceable.
Not all contracts need to be in writing, but under the Statute of Frauds, certain contracts must be in writing in order to be enforceable. A written contract is required for all transactions involving real estate (i.e., lease or sale of a home), any promises to marry, any agreements to pay a third party's debt and any transaction in which performance cannot be completed within one year of the contract signing.