Once you know what a contract is, it is important to understand what parts make up a contract and how they fit together to make the agreement between the parties agreeing to be bound.
There Are Three Major Parts of Every Contract: Offer, Acceptance, and Consideration
To form a contract an offer must be made by the Offeror. The offer must be specific enough that the Offeree can simply say “I accept” in order to be bound by the contract. For example, I could offer to wash your car tomorrow for $20. You could offer to sell me your car next week for $1000.
Both of these offers are specific enough to bind someone who says “I accept.” If the offer is not specific enough a court can fill in specific terms like a price or time.
The only term a court can never fill in for the parties is quantity so if you want to buy bananas you need to specify how many bananas you mean to buy.
Acceptance occurs when the Offeree agrees to be bound by the contract. Acceptance can occur in more than one way. The most traditional and formal version of acceptance usually involves people signing documents, but this isn’t the only way to show that you accept an offer.
Acceptance can also be shown by traditional conduct, like shaking hands or making a toast to the deal. Acceptance can also be shown by performance.
For example, if you agree to paint someone’s house for money, but don’t sign a paper contract, you may be able to show that there was a contract between you and the homeowner if you started the project or purchase supplies.
Consideration is the thing of value that passes between the parties agreeing to the contract. In order to have a valid legal contract, both parties need to be giving valid consideration to the other party.
If someone agrees to give another person something for nothing or for something that cannot legally be considered, the contract will not be enforced by a court. The most common contracts trade money for goods or services, but much more unconventional consideration exists.
Anything physical of value can make up for consideration. Courts have said that consideration can be as minimally valuable as a “mere peppercorn.” consideration can also take the form of time, refraining from certain behaviors, participating in behaviors, holding the option to purchase something open, and anything else you can think of. The only things that can’t be considered are anything that is illegal to own, illegal acts, or marriage.