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Five Essential Elements of an Enforceable Contract

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  • 0:00 Opening Example of a Contract
  • 0:49 What Is a Contract?
  • 1:15 The Five Elements of a…
  • 2:45 Some Examples of a Contract
  • 4:36 Lesson Summary
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Lesson Transcript
Instructor: Tisha Collins Batis

Tisha is a licensed real estate agent in Texas. She holds bachelor's in legal studies and a master's degree in criminal justice.

In this lesson, the reader will learn about the five essential elements of an enforceable contract. Upon completion, the reader should be able to use this knowledge to determine whether or not contracts under a variety of scenarios are enforceable.

Opening Example of a Contract

Patrick wants to sell his house, but he doesn't have much equity. He decides to market and sell his home himself, without the representation of a licensed real estate agent. After taking some photographs of the interior and exterior of the home, he prints some flyers and creates an advertisement online. Fortunately for him, it's the busy season for real estate and within a couple of weeks he has an offer for his home. He accepts the offer and he, along with the buyer, signs the offer. About a week later, Patrick gets some bad news. The contract for the sale of his home isn't enforceable. The buyer cannot buy his home after all and he has to try to find another buyer. How could this have happened? In Patrick's situation, the buyer was a minor and could not legally enter into a binding contract.

What Is a Contract?

Put simply, a contract is an agreement between two or more competent parties that is legally binding. It can be spoken or implied, and is usually in writing. If a contract is enforceable then the parties to the contract can be compelled to perform as they agreed to in the contract. Patrick's contract was not enforceable because the buyer was a minor. However, there are multiple elements that exist that create an enforceable contract.

The Five Elements of a Contract

For a contract to be enforceable there must be five essential elements that exist. They elements are as follows:

  • Offer
  • Acceptance
  • Consideration
  • Capacity
  • Lawful Purpose

These elements of a contract are defined as follows:

Offer

This element is a promise and a demand of some sort. In the real estate realm, it could be an offer to purchase a home or other piece of real estate.

Acceptance

This element is the agreement to the terms of the offer presented. In the real estate realm, it could be the seller accepting a buyer's offer to purchase a piece of real estate. If the party that responds to an offer changes the conditions of that offer, the party is not actually accepting the offer. Instead, he's presenting a counteroffer.

Consideration

This element of a contract is what is actually presented in exchange for the something in the contract. When considering real estate, consideration could be the monetary compensation given in exchange for a piece of real estate.

Capacity

This element of a contract requires that a party that is entering into a contract actually be able to enter into that contract. Remember Patrick and the buyer that turned out to be a minor? That buyer did not have the capacity to enter into the contract. Additionally, a party that does not have capacity could be one that is intoxicated at the time or is mentally incompetent.

Lawful Purpose

This is the final element of a contract. It requires that the contract in question be for a legal purpose and not for an illegal purpose.

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