Our whole economy is based on the freedom of individuals to contract and a system of laws that enforces contracts freely entered into. But a lot of people may not be aware of what are the essential elements required to make an enforceable contract. Recently I was asked if a contract not in writing is binding. We are so accustomed to seeing contracts in writing that many people assume that a contract must be in writing (and lengthy) before it is enforceable.

Agreement is essential to any contract. Before there can be a contract, there must be a consensus ad idem: that is, there must be a meeting of the minds. The two sides to a contract, whether for the construction of the liner Queen Elizabeth or for having your lawn cut, must agree on the fundamental terms of the contract. There must be an intention to enter into a legally binding contract. Whether the parties have reached an agreement is determined by an objective standard. What each party believes the other to be agreeing to will not be the determining factor. Rather, would an objective bystander, acting reasonably, looking at all of the facts relevant to the question conclude that the parties had come to an agreement on the essential terms of the contract with the intent to form a legally binding relationship? If so, there is a contract between the parties.

An agreement can be found in the simplest of words or conduct. The contract for the construction of the Queen Elizabeth, one of the largest liners in its days, was contained in a letter from the builder containing words to the effect "We agree to build the Queen Elizabeth for 5 million pounds".


To form a contract, there are no particular words that must be used by the parties. However, there must be an offer by one side and an acceptance of the offer by the person to whom the offer was made. Without both an offer and an acceptance, there can be no consensus ad idem or a meeting of the minds which is essential to form a contract.

An offer is simply a statement or other indication that the individual is prepared to enter into a contract with another on certain terms. The offer must be expressed in a manner capable of acceptance without anything further required of the person receiving the offer other than to indicate acceptance. It must also be clear that the person making the offer is prepared to be bound by the terms if the offer is accepted. If I make the statement to you "I will cut your lawn for $5.00", this is an offer which on acceptance will form a contract.

The offer must be more than just an "invitation to treat"; that is, not merely expressing a general intent to enter into a contract and inviting an offer in keeping with the general intent. A good illustration is the display of merchandize at a store with a price tag. The display of the merchandize does not constitute an offer waiting for a customer to walk in and accept the offer. Rather, it is an invitation to treat by the store owner. The offer is made when the customer presents the merchandize to the cashier and tenders the amount of the price. At that point, the merchant is free to accept the offer and sell the item. To illustrate this, lets assume a mischief maker has switched price tags so that the latest cd by the hottest jazz sensation is priced at $5.00. When you take this to the check-out counter, the store is not bound to sell the cd to you for this price. The store owner is perfectly entitled, in law, to say that the item is mislabelled and will not be sold for that price.


Acceptance is simply some indication by the person receiving the offer that the offer is accepted. The acceptance must be clear and absolute and without conditions attached. The objective bystander must be able to determine that the offer has been accepted. In response to my offer to cut the lawn, your response "That sounds like a good deal" is not acceptance. If I proceed to cut the lawn as a result, there is no contract. However, if you say words to the effect "we have a deal" or more precisely, "I accept", then there is a binding contract. If I then cut the lawn, I have an enforceable contract under which I could collect the $5.00.

The acceptance must be made before the offer has expired. Most offers contain a time limit within which the offer can be accepted. Once the offer has expired, it can not be accepted unless the person making the offer has renewed it. If there is no time limit by which the offer must be accepted, then the law requires the offer be left open for acceptance for a reasonable period of time. What exactly is a reasonable period of time will depend upon the particular circumstances of each case. The offer must be accepted before it is withdrawn. An offer can be withdrawn before acceptance unless one of the terms of the offer is that it will remain open for acceptance until a specified time. On occasion, the circumstances of the dealings between the parties may be such that the law would impose a term on the parties to keep the offer open for acceptance for a reasonable period of time.


No conditions can be attached to the acceptance and the terms of the offer can not be changed. If conditions are attached or terms are changed, the parties are merely negotiating and may ultimately reach agreement on the terms of the contract. For example, if your response is that you will pay me $5.00 to cut the lawn but I must cut again next month for the same price, there is no contract. You have made a counter offer which I am free to accept or reject. Likewise, the acceptance can not be conditional on some other events.

The contract constitutes a bargain. The acceptance of the offer is the bargain the parties have struck: - an exchange of a promise for a promise or act has been made. It is this consideration that makes the contract binding. Consideration is some benefit or advantage to the person making the offer and a corresponding cost or prejudice to the person accepting the offer.


It is left to the parties to determine whether or not the consideration is adequate; only the parties can judge whether or not it is a good bargain. The law only requires that there be sufficient consideration; something of value must be given. The consideration can not be something given or promised in the past. To be valid, the consideration must be a new promise or some fresh benefit exchanged for the offer. This is subject to the courts refusing to enforce an alleged contract where the consideration is so inadequate as to raise suspicions of fraud or to make the contract unconscionable.

In general then, as long as the basic elements of an offer and acceptance with consideration are present, the parties have a valid and binding contract. There is no requirement that the contract be in writing except in certain special situations such as the sale of land. The problem is that if the verbal exchanges of the parties are to be relied upon, it may prove difficult and in some cases impossible to determine precisely the terms of the contract if there in fact is a contract. If the court can not with reasonable certainty determine the terms that the parties have agreed to, the court can not enforce the alleged contract. It is for this reason that it is wiser to have a contract in writing although writing itself is no assurance that the alleged contract is clear and precise.

If you have any questions on the issues discussed above, or on any legal issues  in general, please contact Sucha S. Ollek at: