The third essential term of a valid and enforceable contract is CONSIDERATION.
There must be valid CONSIDERATION. This is simply an exchange of something of value, a bargained-for-exchange, which could be money, property, services, or where one party agrees not to do something it has a right to do, such as not sue. Without a bargained-for-exchange of something of value, a legal contract does not exist.
Let’s recap, the three essential components of a valid and enforceable agreement are: an OFFER, an ACCEPTANCE, and bargained-for CONSIDERATION.
Some other elements of a valid contract are:
- Capacity to contract: the parties are legally able to enter into a contract, e.g., of a sound mind, not acting under duress, and over the age of majority (e.g., 18, 21). Since contract law is state law, individual states determine the age of majority. Beware when entering into agreements with minors, because those contracts are voidable at the discretion of the minor. Bad idea!
- Consent: the parties each agreed to the contract honestly and voluntarily.
- Legality: the products or services, which are the basis of the contract must be legal exchanged must be legal; anything illegal is not enforceable in a legally binding contract.
When a party fails to fulfill their obligations under a contract, and when there is no valid excuse for their nonperformance, then a breach of contract has occurred. This may relieve the non-breaching party of their duty to comply. In the event of a breach of contract, the non-breaching party has several remedies, which include receiving money damages or compelling the person to do what they agreed to do.
Until next time, think asset protection!