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The 3 most fundamental elements of a valid business contract

On Behalf of | Dec 29, 2023 | Business Transactions, Commercial Litigation

Contracts are the lifeblood of the business world. They secure commercial transactions and provide the framework within which companies operate. While contracts can vary greatly in complexity and scope, all valid business contracts share three fundamental elements. Understanding these key components can save you from legal headaches and ensure the integrity of your agreements.

Offer and acceptance

The foundation of any agreement is an offer made by one party and the acceptance of another. After all, more than anything, a contract is a legal and enforceable agreement. A valid offer must be explicit and specific, detailing the product or service provided and the expectations from the other party.

The acceptance of the offer must also be explicit and unequivocally expressed to the party making the offer. It should mirror the terms of the offer for it to constitute a “meeting of the minds” or mutual agreement.


Consideration is what each party brings to the table. The idea behind trade and commerce is exchanging something of value for something else of similar value. The contract formalizes the exchange. Consideration is the contract element that induces the parties to agree because it implies that both will get something out of the deal. It does not always have to be a fair exchange as long as the parties agree to it without undue influence or coercion.


A contract that involves illegal activities or goes against public policy is invalid and not legally enforceable. Furthermore, the contract must adhere to the specific laws relevant to the industry, location and type of transaction, which can vary from state to state. For example, if you are an employer in Oklahoma, your employee contracts must comply with state and federal labor laws. Sale contracts must also align with trade regulations.

A breach of contract is one of the most common reasons people decide to pursue commercial litigation usually because the terms aren’t clear, the contract isn’t valid or one of the parties fails to fulfill their end of the business deal. Therefore, before making an offer or accepting an exchange, ensure you completely understand the terms and conditions. It might be wise to talk to a lawyer before formalizing any agreement.