Hardly does a day go by without individuals entering into one form of agreement or the other, either overtly or covertly. These agreements can be in form of selling or leasing property, becoming an employee or independent contractor, settling disputes, and many more. In so many cases, individuals enter these agreements without considering the essential provisions necessary to create an enforceable contract. Please don’t be one of them.
– By Olayiwola Obayan
In order to avoid or at least minimize pitfalls, I will run you through some basic elements of a valid contract.
Contracts May be Oral or Written
A contract is basically an agreement between two or more parties who have the capacity to enter into a contract. It can be oral, but an oral contract (sometimes referred to as a verbal contract) may be difficult to enforce unless its terms can be proved or are admitted by the parties. It can also be a written contract that contains the essential provisions that reduce this risk (this is recommended).
Consequent upon the above, below are the essential provisions of an enforceable contract that must be looked out for at every stage of a contractual obligation:
An offer is a mere expression of willingness by one party to contract on certain terms with another party with the understanding that the contract will become binding when accepted by the person to whom it is offered.
It should be noted that an offer may be made in different ways, such as in a letter, an email, or even your behavior, so long as it conveys the basis on which the offering party is willing to contract. An offer should consist of:
(1) A statement of present intent by the offering party to enter into a contract
(2) A specific proposal that is certain in its terms
(3) A communication that identifies the person to whom the offer is made. If any of these elements are not present, an offer has not been made.
Upon an offer being made, acceptance, which is a final and unqualified expression of consent to the terms of an offer, should ordinarily follow. Needless to say that an offer may only be accepted by the person to whom it is made unless an agent is authorized to accept on behalf of that person. In addition, an acceptance must be made in the manner requested or authorized by the offering party. If the party to whom the offer is made changes the terms of the offer, he or she has rejected the initial offer and has made a counteroffer that may or may not be accepted by the other party.
Parties to a contract must be competent to enter into a contract. In general, most individuals are deemed to have the capacity to contract unless the person is a minor, incompetent or insane, drunk or drugged when entering into the contract.
Lawful Subject Matter
In order for a contract to be enforceable, its subject matter cannot be prohibited by law or violate public policy. For example, a contract for the sale of illegal drugs is not enforceable, and a person cannot promise to transfer clear title to real estate if the property is encumbered by a lien or mortgage or basically under litigation.
Mutuality of Obligation
In order for there to be an enforceable contract, the parties must have a common intention or a meeting of minds on the terms of the contract. The parties must agree to the same thing, in the same sense, and at the same time. If one party to a contract has been fraudulently misled about the terms of the contract by the other party, the contract is voidable.
Consideration is a very important element of an enforceable contract. Consideration may be money or a promise. In addition, consideration may consist of a restraint from suing on a claim that may be part of a legal dispute. There are however varying views on whether consideration must be monetary; the main thing is that it must have value in the eyes of the law. Whatever consideration is provided under a contract, must be clearly agreed upon by both parties to the contract or it must be clearly implied by the terms of the contract.
With this general overview of essential terms, consult a lawyer to make sure your next contract is legally enforceable and meets your original intentions.
The information contained in this article is for informational purposes only and should not be construed as legal advice.
Need legal advice? Send in your questions.
Olayiwola Obayan studied Law at Obafemi Awolowo University. He practiced law privately before joining the employ of the Federal Ministry of Justice. In quest for higher education, he further proceeded to obtain his Masters degree in international trade and investment law at the University of Pretoria South Africa. In 2016, he became a UNESCO fellow upon completion of a one year UNESCO fellowship program. He presently practices law, facilitates foreign
investment and writes.
Editor’s note: This article was originally published in the Spark Magazine. Find the magazine here to read more articles.
Olayiwola Obayan, is a Senior Analyst at Mega International Commercial Bank. He is a passionate Attorney and Anti-Money Laundering/KYC Analyst with over 9 years of professional experience in handling money laundering issues, regulatory compliance, policies and procedures, entities and individuals onboarding with emphasis on the new FinCEN rules, project management within the financial services sectors, fraud investigations, and risk mitigation. He has worked in collaboration with diverse non-governmental and governmental teams in strategizing and implementing compliance projects within the accepted sphere.