It is amazing how many processes and transactions are governed by contract law. Real estate sales contracts, credit card applications, bills of sale, apartment leases, land contracts, mortgages (or deeds to secured debt if you live in Georgia), and deeds are all governed by contract law, which is quite complicated. While reviewing a sales contract this weekend, I started to wonder what makes a contract valid. According to my real estate text book, the following items need to exist for a contract to be enforcable in a court of law:
1. An agreement needs to be made between parties.
2. Something of “consideration” needs to be at the heart of the contract.
3. Parties to the contract need to be “competent.”
4. There needs to be reality of consent.
5. There needs to be legality of purpose.
6. Necessity of writing is required in most circumstances.
All of this sounds complex, but is actually relatively straight forward. An agreement consists of an offer and acceptance. Something of consideration would be a house, a boat, a yaht, an island off the coast of Costa Rica, or a large wad of cash. Competent parties are parties not under the influence of drugs or alcohol. Reality of consent ensures that a contract is free of mistakes, misrepresentations, fraud, undue influence, and duress. The consent of all parties must also be real and intentional. Legality of purpose ensures that contracts involve legal promises, actions, and objections. A contract containing illegal acts or objects would violate this condition. For a detailed explanation of contract law (including stuff I missed), you can head over to No Law.