Historically, there are certain legal elements that every contract must have to make it enforceable in court. The five essentials of a contract are:
- Identity of the Parties
These Elements Should Be Understood as Follows:
- Identity of the Parties. The parties to the contract must be specifically identified, including the jurisdiction of organization of any business which is a party to the contract.
- Consideration. Sometimes the consideration will be money, but that does not have to be the case. What is important is that there is something mutual between the parties and that is acknowledged in the agreement. The acknowledgement does not have to recite the specific amount of consideration, because the parties may not want others to know. Instead, the contract may say “For and in consideration of the mutual promises and benefits to be derived by the parties…” or words to that effect.
- Terms. This is the main part of the contract. The parties should state in as clear a fashion as possible what they are agreeing to. The language should be adequate to allow a stranger reading the contract to understand what each party intends.
- Execution. The contract should be signed, although this may prove complicated when corporations, partnerships or limited liability companies are included. Consult your legal advisor to assure that all desired parties will be properly bound by the contract.
- Delivery. The delivery of the contract is an old formality, but is still a necessity. Even though the contract is signed, unless it is delivered before the opposing party cancels, there is no valid contract.