Main Elements Constituting a Valid Contract

Contract is an official agreement. It could be written or even be in oral. Contracts can be written by using formal or informal terms, or entirely verbal or spoken. It is a promise made between two or more parties that which allow the courts to make judgement. A contract has six important elements so that it will be valid which is offer, acceptance, consideration, intention to create legal relation, certainty and capacity. If the main elements are not in contract, it would be an invalid contract.

1. Offer

The first element in a valid contract would be offer. An offer or a promise or an agreement needs to be in contract because if there is no offer than there will be no contract. In the Contracts Act, 1950, the first elements in a contract would be offer. It is one of the elements to make sure that the contract is legally valid or acceptable. In a contract, it is very important that a party would make an offer. There is a difference of offer between an advertisement and an option. To make an offer, there should be at least two parties or even more so that it would be legally capable of entering into a contract. If the offer is accepted than it would constitutes to a legally valid contract. When an offer is being made, the other party or person would know what is being offer and what the person or party who made the offer expect to have in return. It is the same when anybody goes on a holiday, stays at a hotel and so on. For example, a family has made an arrangement with a tour agency to have a holiday at Hong Kong for a few days. The tour agency would make a contract by making forms to the family which would have to be filling up. The family member who fills up the form would have to be clear with the rules and regulations given by the tour agency company. Once it is fills up, the contract has been made between the family and the tour agency.

2. Acceptance

After having an offer in the contract, there should be acceptance. For a contract to be made there should be acceptance from the other party or person. When the other party is clear with the offer, there would make an acceptance once they are clear with the rules and regulations being offer in the contract. There will be no contract if the parties are still negotiating or discussing and have not made accept the offer. The person or party can accept the offer being made in writing or orally which is made verbally or being spoken out. For example, a tourist writes to hotel K requesting information about the cost and availability of accommodation for the week commencing on the 15th April 2011. The staff at hotel K answers the inquiry states that the accommodation available for that week would cost RM 600 and if the tourist responds with the deposit of RM 100 within a week, then the room will be allocated to him. If the tourist accepts the offer, then the contract has been made for the tourist and hotel K.

3. Consideration

Consideration is also a very important element in the contract. Consideration in a contract would mean the other person would be giving back something in return. It would be consider as an exchange which would be made between the promisee and promissor. There should be consideration in a contract so that it would be legally valid. For example, a customer in a fast food restaurant like McDonalds orders a set lunch which costs RM7.95. By ordering the set lunch, the customer is agreeing to pay RM7.95 as consideration. However, consideration does not give any threats to on ‘ line holiday contracts. Holiday services which are being provided by the on ‘ line holiday providers and also the consideration by giving something back in return which would be the payment money or even the payment made by the holiday makers would eventually follow the requirements for consideration of a contract.

4. Intention to Create Legal Relations

It is essential to have this element in a contract. It is a necessity of the intention to create legal relations although the Contracts Act 1950 is silent on the intention to create legal relations as one of the requirements of a valid contract. This element would have an agreement which is not a contract in the strict sense unless it is the common intention of the parties that it should be legally enforceable. If there is no intention to create legal relations in a contract, the contract could be subject to a lawsuit. For example, when there is a contract or an agreement made between the parent and the children. If the parent passes away, the children would have whatever property or possession which is left by the parent.

5. Certainty

Another main element in a contract would be certainty. The terms and regulations being made in a contract should be stated clearly and understood by the parties of the contract. If the agreement is not certain, it would be no longer valid. For example, if the guest wants to stay in a hotel, , the guest needs to inform how many days he or she is staying at the hotel, the type of room, and also the date when he or she are going stay and the number of days he or she is staying.

6. Capacity

Capacity in a contract is the parties to the contract must have the legal capacity to do so. 18 years old is stated as the age of a major. Minors who are people below the age of eighteen have no capacity to enter into contracts. Therefore, insane people or people with unsound minds also cannot enter into any valid contracts. For example, a person who is at the age of sixteen years old could not stay at a hotel. The hotel staff would not allow having the person who is sixteen years old to stay at the hotel since that person is not eighteen years old or above. For the person to stay at the hotel, he or she must have a guardian who is above eighteen years old or a parent to accompany him or her to stay in the hotel.

Conclusion of the elements in a valid contract

Therefore it is important to have the main elements in a contract. Only if there are all the main elements in a contract then it would be legally valid to make a contract. People should take precaution in making a contract to make sure that the parties would be in agreement with the terms made in a contract.