Legal Elements of a Contract
The essential elements necessary to form a binding contract are usually described as: i
• An Offer
• An Acceptance in strict compliance with the terms of the offer
• Legal Purpose/Objective
• Mutuality of Obligation – also known as the “meeting of the minds”
• Consideration
• Competent Parties ii
Offer
An offer is defined as the manifestation of the “willingness to enter into a bargain so made as to justify another person
in understanding that his assent to the bargain is invited and will conclude it.”iii
Acceptance
Acceptance of an offer can occur in several ways: Acceptance of an offer is a manifestation of assent to the terms
thereof made by the offeree in a manner invited or required by the offer.iv An acceptance must not change the terms
of an offer. If it does, the offer is rejected.v A material change in a proposed contract constitutes a counteroffer, which
must be accepted by the other party.vi
Legal Purpose
The objective of the contract must be for a legal purpose. For example, a contract for illegal distribution of drugs is not
a binding contract because the purpose for which it exists is not legal.
Mutuality of Obligation
This element is also known as the “meeting of the minds”. Mutuality of obligation refers to the parties’ mutual
understanding and assent to the expression of their agreement.vii The parties must agree to the same thing, in the same
sense, at the same time. The determination of a meeting of their minds, and thus offer and acceptance, is based on the
objective standard of what the parties said and did and not their subjective state of mind.viii Unexpressed subjective
intent is irrelevant. In determining whether mutual assent is present, the court looks to the communications between
the parties and to the acts and circumstances surrounding these communications.ix The offer must be clear and
definite just as there must be a clear and definite acceptance of all terms contained in the offer.x Where a meeting of
the minds is