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The Importance of The Elements in The Formation of a Contract

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The designation of the contract is to create legal relations. A contract is to provide product or services which are a written of definitive agreement between the two parties and it is generally count on as a commercial transaction. Especially, when you have signed an agreement had been given by other parties, the contract should have the rights and obligations that are recognized and enforceable by law. In other words, if the contract might not meet of minds between the contracting parties then you will be the right to sue the other party.

According to the basic principles of the contract, there can only be rejected when you did not intend to make a legally binding contract unless you enter to this contract. Most of the times you can see the word subject to contract. This word has the legal meaning but this document doesn’t mean that you entered to the contract unless the parties sign on that contract. The contract can be turn down when the time before it is concluded. In case of quarrel between two parties, the create of a binding contract is to ensure the contract carry on to the person who wishes to rely on the contract.

The contract basically requires an offer, acceptance, and consideration to make it legally binding document.


An offer is the important first step in the contract formation process. This agreement Is to engage one person (the “offeror”) to another (the “offeree”). When the person who makes this offer (the offeror) willingness to enter into a contract on certain term and see whether the power of the term can attract the offeree to accept the offer. The offer must be communicated. For instant, in writing, orally or by conduct. An offer must be distinguished from an “invitation to treat”. To distinguish an offer, courts look for three requirements. At first, the offeree has to focus on the implication of the contract. Secondly, they look for particularity, or definiteness, in the term of the alleged offer. Thirdly, they must look whether the offer has been communicated to the offeree.


There is no contract between the parties until they assent or concurrence to term of the offer. Other than that, the contract must be ineligible and unconditional assent of the offer, otherwise it amounts to a counter-offer. Most of the acceptance is through orally or in writing. However, least of the acceptance of the contract use by conduct unless the contract allows that the acceptance and performance of contractual duties are to be carried out simultaneously.


The offeror must provide something value, promised done by offeror in exchange for the offeree so that parties can enter to the agreement. The word “in exchange” mean that the parties have something consideration with each other. In a practical context, it is the money, goods and services are the most common examples of the exchange.

There are three major rules on consideration.

  1. consideration need not be adequate but must be sufficient.
  2. consideration must move from the promise.
  3. consideration must not be past.

For example, the price that the offeror set in the contract that below the market price, so that the offeree can be turn down the contract cause the seller cannot provide the price that buyer needed. This contract did not reached the rules of consideration.

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