Contracts are agreements that are formed between or among two or more parties. In order to create a contract, there must be mutual agreement of all parties to the contract.
How Courts Determine if There Was Mutual Agreement
Courts will determine whether there was mutual agreement by looking at the works spoken or written by the parties or the conduct of the parties. Courts view these things objectively, looking at the outward conduct of the parties, rather than the subjective intent of the parties.
The question is: Did one party, through his or her actions, lead the other party to reasonably believe they had an agreement? Parties may mutually agree and create a contract orally, in writing, or both.
Elements of a Contract
All contracts have the following three elements:
An offer is the communication by one party to another party of a willingness to enter into a bargain, and invites the other party to accept the offer. An offer may only be accepted by the party to whom the offer was made. Once an offer is revoked, it may not be accepted.
Acceptance of an offer is a communication by one party to the offering party of agreement to enter the bargain and comply with its terms.
An offer may only be accepted by the person to whom the offer was communicated, and not by a third party. Generally, acceptance is only valid if communicated to the party making the offer.
Once an offer is rejected, it cannot be later accepted unless a new offer is made. Once an offer is revoked before it is accepted, it may not be accepted.
“Consideration” is required in order to have a valid contract. Consideration requires a bargained for return promise. Basically, both parties have to actually do something or give something up. A contract is not a free ride for either party, because consideration is required.
Consideration may be a benefit to one party or a detriment to that party. However, the obligations of each party do not need to be equal in value. Consideration is found when one party is obligated to do something in exchange for the act or promise not to act by the other, regardless of value.
Courts will not make determinations as to the adequacy of the consideration, as long as it is something the law recognizes as having a value of some kind. The requirement of consideration is intended to prevent accidentally or gratuitously entering into a contract.