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What Are the Elements of a Legal Contract?

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Paul R. Bedard, EsquirePaul R. Bedard, Esquire

Health club owners and operators are routinely parties to contracts. Some of these contracts are formal and complex, whereas others are informal and simple. However, regardless of these specifics, what constitutes a legal contract?

An enforceable contract requires three elements: an offer, acceptance and consideration. There must also be a meeting of the minds between the contracting parties, along with an absence of fraud, duress, legal incapacity or any one of the many legal defenses to a breach of contract claim. Although contracts can generally be oral or verbal, some types of contracts must be reduced to writing. State laws govern contract enforceability and these laws vary, adding yet another legal facet that requires analysis when trying to determine whether a contract is legal.

Offer

A contract begins with an offer. The offer must evince a party's willingness to enter into a contract under certain terms in exchange for performance by another party. The party making the offer is the offeror. The party receiving the offer is the offeree. Once an offer is made, the burden shifts to the offeree to either accept, reject or counter the offer.

Acceptance

If the offer is accepted without deviation from the offer's terms, a contract is formed. If the offer is rejected, there is no contract until a new offer and a resulting acceptance occur. However, when an offer is rejected, and a counteroffer is made, the burden then shifts back to the original offeror to either accept, reject or counter the counteroffer. Any rejection of any offer or counteroffer throughout such back and forth negotiations extinguishes any potential contractual relationship until a subsequent offer and corresponding acceptance transpire. When an offer is made and formally revoked by the offeror prior to being accepted by the offeree, the offer is no longer legally valid and any acceptance thereafter will not constitute a binding legal agreement.

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