More often than not people always wonder if the contract they have signed is valid after some time or when a dispute arises. So before you even begin to agree on something or sign a contract make sure that the contract itself is valid and can be legally enforced. This will ensure that both parties to the contract are legally protected and can legally enforce the contract against either party.

For a valid contract to exist there needs to be certain things which are present. We call these the essential elements of a contract:

1. Offer and acceptance
2. Mutual agreement 
3. Consideration
4. Competent parties
5. Legality of Purpose 
6. Proper Form

These are discussed in detail below.

Essential elements of a contract

1. Offer and acceptance

There should be an offer that is made by the party who wishes to enter into a contract. Thereafter, there should also be an acceptance by the party who wishes to be bound by the contract. Therefore if there was never an offer you cannot say that a contract existed. Likewise if there was an offer but it was never accepted then such a contract does not exist. 

There are various ways of accepting an offer and most of them depend on how the offer was made. For instance most likely if an offer is made in writing the acceptance will also be in writing and if made verbal the acceptance would most likely be verbal as well. So it’s always best practice to make sure that both offer and acceptance are clearly stated from the beginning.

2. Mutual agreement 

There has to be a mutual agreement between the parties agreeing to enter into the contract. This means that the party who is making an offer must understand the offer they are making, and if an acceptance is made, they must understand the implications of such acceptance. 

Likewise, a party who accepts the offer must understand what the offer entails and what it will expect him to do and what implications the acceptance will have. If this is satisfied, we can safely assume that the parties have a meeting of minds that they each understand each other and what the contract means for both of them. 

3. Consideration

Consideration refers to the requirement of something in exchange for entering into the contract. It may be money, services, an item etc. It is a promise that a benefit will accrue from the contract. 

For instance, in a contract for the sale of a drink for $5. One is promising to provide the drink in exchange for the $5, while the other is promising to provide $5 in exchange for the drink.

4. Competent parties

The Parties who enter into a contract must be of sound and competent mind. This means that they should:

1. Be of legal age;
2. Mentally capable of making decisions;
3. Not be under the influence of drugs and alcohol;
4. Not under duress or pressure;
5. Not have any mental disease, etc. 

Remember one of the elements of a contract is that the parties should have a mutual agreement therefore if someone is not competent to enter into a contract in the first place, then there is no mutual agreement therefore no contract. 

5. Legality of Purpose 

The contract should be legal. This means that it should be a contract to do something that is legal according to the law and that is recognised under the law as something that can be done. This is because if there’s a dispute in a contract, parties normally seek the assistance of the law, either going to Court or going for Arbitration. Therefore, the Court needs to be able to determine the matter and make an order for the fulfilment of the contract. 

A contract to do something illegal is not valid and will not be enforced by the courts. 

6. Proper Form

A contract must be in a proper format. As mentioned earlier some contracts can be verbal or written. 

Therefore, for contracts that are written there must follow a certain format.  For instance, there must be a signature of the parties to the contract to indicate who made the offer and who accepted.

Another example can be a contract of sale for property, that contract has to be in writing and include the details of the property being sold. These are some of the examples, so always make sure you are aware of the kind of contract you are entering into as that will inform you of the form it needs to take. According to me, verbal agreements should only be concluded when both parties stand to not lose much and if in doubt, always get it in writing.. 

Lastly, before entering into any contract make sure to always consider the above elements. All these elements must all be there for a valid contract to exist and all these elements are important.

References:

A.L. Liuzzo, “Essentials of Business Law”, McCraw-Hill, New York, 2013.

T. Naude, J. E. Du Plessis, S. Eiselen, T .Floyd, L. Hawthorn, B. Kuschke, C. Maxwell,  “The Law of Contract in South Africa”, Oxford University Press Southern Africa, 2018.

R. H. Christie, G. Bradfield, “Christie’s the Law of Contract in South Africa”, LexisNexis, 2022.

Author

Tshegofatso M Seretse (Editor)

Tshegofatso M Seretse (nee Gareegope) LLB, LLM, MBA is the Founder and Editor of Legal Dialog, whose mission is to empower lives through legal education. She is also an admitted Attorney, Conveyancer and Notary Public in the High Court of Botswana who loves the law and believes in legal advocacy. Tshegofatso is also a Published Author, Blogger and legal advocate.

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