Contracts are an essential part of conducting business in today’s world. They are legally binding agreements between two parties outlining the terms and conditions of a transaction. However, not all contracts are created equal. To be valid, a contract must meet specific criteria. In this article, we will explore the terms that must be present for a contract to be valid.

Offer and Acceptance

The first term that must be present for a contract to be valid is an offer and acceptance. An offer is defined as a proposal made by one party to another, expressing their willingness to perform a particular task or provide a service. The acceptance is the other party agreeing to the terms outlined in the offer. If either the offer or acceptance is missing, the contract is not valid.


Consideration is the value that each party agrees to exchange as part of the contract. This can come in the form of cash, goods, or services. Consideration is essential to form a contract and must be agreed upon by both parties. Without adequate consideration, a contract cannot be formed.

Legal Capacity

To form a contract, both parties must have the legal capacity to enter into an agreement. This means they must be of legal age and have the mental capacity to understand the terms of the contract. If one or both parties lack the legal capacity to enter into a contract, the agreement is not valid.

Mutual Consent

Mutual consent means that both parties must understand the terms of the contract and agree to them. If either party is misled or coerced into entering into a contract, it is not valid. Both parties must fully understand the terms of the agreement and agree to them without any pressure or misunderstanding.

Legality of the Subject Matter

The subject matter of the contract must be legal for the agreement to be valid. If the subject matter of the contract is illegal, immoral, or against public policy, the agreement is not valid. For example, a contract to sell illegal drugs is not valid.


In conclusion, for a contract to be valid, all the terms must be present. These include an offer and acceptance, consideration, legal capacity, mutual consent, and legality of the subject matter. It is essential to ensure that all these terms are present before entering into any contractual agreement. By following these requirements, both parties can enter into a legally binding agreement that protects their rights and interests. As a business owner or entrepreneur, it is crucial to understand these terms to protect your business and avoid any legal implications that may arise.