Elements of a Contract FINAL.docx

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Running head: CONTRACT ELEMENTS 1 The Elements of a Contract Sandra Michele Dorsey Legal Environment/BUS670/MOD1726A Professor Mark Cohen July 17, 2017
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CONTRACT ELEMENTS 2 The world of business revolves around agreements between individuals and businesses which are commonly referred to as contracts. Contracts can be in written or oral form. Written contracts are always preferred because all prescribed terms are clearly documented and can be used as evidence should a legal dispute ensue. Written contract agreements can be costly and time consuming to prepare but are essential when deciding if there are grounds for legal action. Although oral agreements are enforceable by law, some agreements such as real estate contracts must be in writing. Written contracts represent the best protection for creating transparency of expectation and limitations. Oral agreements can be difficult to prove contractual details since information can be misinterpret and miscommunicated. Oral agreements are created through normal conversations. For instance, when clients agree to pay their hair stylist after the completion of a service, this is the completion of an oral agreement. Also, legal requirements concerning the structuring of a contract differs from state to state. “All contracts contain promises that are enforceable, not all promises rise to the level of a contract” (Seaquist, 2012, sec. 9.2, p.138). The Requisite of a Contract For contracts to be valid, the promises must meet a certain criterion to be enforceable by a court. The requisite elements that must be present for the formation of a legally binding contract are offers, acceptance, consideration, mutuality of obligation, competency and capacity, and written instrument. An offer is defined as the promise to act or not to act in exchange for a return promise to do the same. For example, the Fabulous Hotel extends an opportunity to Joe Smith as head chef with yearly compensation of $100,000 per year, with bonuses. The acceptance of this offer happens when Mr. Smith signs an employment contract with the non- compete agreement, agreeing to the terms of the offer. Consideration occurs when the parties
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CONTRACT ELEMENTS 3 offer something of value to encourage the other to enter into an agreement.
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