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The Elements of a Valid Business Contract

Business contracts  are binding legal agreements between a buyer and seller of goods or services. A good contract clearly spells out the details of the exchange and what’s expected of each party. From credit card applications to hiring a roofer, or business-to-business agreements, a contract is a contract. But no matter how top-heavy it is in fine print, if the agreement fails to include certain basic elements, it will not be defensible in court should things go sideways.

The Basic Elements –  A Contract Primer

There are plenty of standardized contract forms online. As a business lawyer I can tell you I’ve seen my share of contracts fall by the legal wayside. Why? Because they lacked the basic elements and verbiage that make a contract legally enforceable. In short, they did not hold up to legal scrutiny. One or more of the basic elements were missing, usually because the contract was not at minimum checked over by a lawyer.

4 Mandatory Elements of a Legal Contract


Offer 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. Signing a credit card agreement, volumes of fine print aside, essentially says you will use the service based upon all stipulations listed, usury interest rates notwithstanding.


This element is the agreement to the terms of the offer as presented. Again, in the real estate realm, it could be the seller accepting a buyer’s offer to purchase a piece of property. If the party that responds to an offer changes the conditions of that offer, the party is not considered to have accepted the offer. Instead, the buyer may present a counteroffer, which, when signed by both parties, fulfills the acceptance requirement. Signatures are the hallmark sign of acceptance.


This element of a contract is what is actually presented in exchange for the good or service something in the contract. When speaking of real estate, consideration could be the monetary compensation given in exchange for a piece of property. A credit card contract provides funds up-front in exchange for payment with interest on a monthly schedule.


Capacity protects contracts from being signed by parties deemed either unlawful by age restrictions or in some way unfit, as in mentally or emotionally. Parties must be capable of comprehending contract terms. This element has been used successfully in upending contracts when one or more parties are found to be deficient.

Word to the Wise

Whether you’re in business or doing business, when it comes to contracts, you’ll want to make sure all the I’s are dotted and T’s are crossed. You may think at first glance that your contract or the one you’re signing meets all the criteria. From my experience as a lawyer, more often than not the average person is unqualified to identify legal loopholes. Your contract may be less than ironclad.  It isn’t your fault, but don’t make it your business’s downfall.

We’ve Got You Covered

The Law Offices of Eric J. Pross specializes in creating and/or assessing business contracts that hold up in court. If you live in West Hollywood, Beverly Hills, Hollywood, Santa Monica, Westwood and surrounding CA communities call us for an appointment and make sure your business contract meets legal standards.

All information provided in this article is for educational purposes only, and does not constitute legal advice. Each situation is dependent on the specific facts and must be evaluated on a case-by-case basis.

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