2.1 Elements Of A Legal Contract Copy

A contract is a legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration.

Consideration

Each party to a contract must give something of value, known as consideration, to the other. Without valuable consideration on both sides, a contract is not binding. Under the law, consideration may consist of money, an act, a promise, or the giving up of a legal right.

In forming an insurance contract, the consideration of the insurer is a promise to pay if a loss occurs. The consideration of the insured is the policy premium and a promise to meet the conditions of the contract.

Competent Parties

For a valid contract, the parties making and accepting an offer must be legally competent to do so. Minors, insane people, and people under the influence of alcohol or drugs are generally not legally competent to enter into a contract. Actually, minors may enter into contracts but may void the contract up until the age of majority.

Legal Purpose

Valid contracts must have a legal purpose and be consistent with public policy.

DEFINITION OF LEGAL PURPOSE: Essential element of an agreement in contract law whereby an agreement is legal and enforceable only if it complies with the law of the land and public policy. Any agreement entered into for an illegal purpose is not legally binding.