We enter into bargains every day. When we drive into a service station and start pumping gas, we've agreed to pay for the fuel. When we sit down in a restaurant and order a meal, we're contracting for the provision of a product (food) and service. We've all entered into agreements with respect to Infobarrel concerning our writings here. But how many of us really understand the elements that make up the contracts we're entering?

Basically, a contract has 3 essential elements: there has to be an offer; there has to be acceptance; and there has to be consideration. Each of these elements can be broken down into further detail. An offer is the expression of a willingness to enter into a bargain, so made as to justify another person understanding that his assent to that bargain is invited and will conclude it. (In other words, the offeror makes the offer in such a way that the offeree understands what is being offered and what is required to complete the agreement.) This expression or manifestation of willingness can be written, oral, a gesture (such as at an auction), etc. In addition to showing a willingness to enter into a bargain, an offer must also have certainty of terms - i.e., what will be exchanged, when it will be exchanged, the cost, etc. Finally, the offer has to be communicated to the offeree.

Acceptance is some expression of assent to the terms of the offer. It normally consists of two components: the giving of the requested promise or act, and some manifestation of agreement to the deal.

Consideration is the element that makes a contract legally binding. It is some right or benefit for one party (the promisor) or some detriment or loss to the other party (the promisee). Basically, it's the reason or cause for the contract. Consideration itself usually has two components: the items being exchanged must be bargained-for and actually traded, and there must sufficient legal value (i.e., the exchange being made in the agreement should be rational - nothing like buying a Mercedes for fifty cents). In most situations, people tend to think of money as consideration, but the fact of the matter is that consideration can be anything - even something as simple as a promise.

In brief, these are the elements of a contract, and knowing this will hopefully make you a better business person and more aware of contractual expectations.