Contract Law: Elements of Contract Formation

This article discusses the elements of contract formation in contract law, including capacity and consideration. It explains the importance of legally valid consideration and capacity in forming a contract. The article also covers the mutuality of obligation and how it ensures that both parties are bound by the contract.

Running head: CONTRACT LAW 1
Contract Law
Name:
Institutional Affiliation:

CONTRACT LAW 2
Contract Law
My Posting 1
The main aim of contract law is to enable the self-governing parties to have the power to
use contracts to advance their shared objectives. The principle of formation of contract has been
interpreted through various elements. The formation of a contract entails a process that is
objectively viewed.1 This means that a small child or a mentally incompetent person does not
have the capacity to appreciate and truly understand the obligation and promise of a contract.
Capacity as an element of a contract is the ability of the parties to join legally binding contracts.
Legal incompetence and incapacity are employed as legal doctrines to protect the parties that
lack the ability to understand the agreement terms. Besides, a contract joined by a person that
does not have legal capacity is deemed void and only enforceable at the preference of the party
that the law aims to protect. Contrastingly, a void contract cannot be enforced since it does not
exist in the view of the law.
Legal incapacity can be determined from insanity, drunkenness, infancy, and the
contractual powerlessness of corporations. Mental incapacity and infancy have the same law
regarding the voidability of contracts. In case of insanity before the contract formation then the
contract is absolutely void. However, when the party was not legally insane at the time of the
contract formation the contract might not be deemed voidable. As for corporations, they have
implicit power to enter in contracts as long as it relates to the accomplishments of the stated
purpose of the corporation. Hence, a contract can only be considered legally valid if both parties
had the capacity to comprehend the details of the contract.
1 Klass, G. (2018). Interpretation and Construction in Contract Law. SSRN Electronic Journal.

CONTRACT LAW 3
My Posting 2
The ‘consideration’ element of the principle of contract formation is also as important as
‘capacity.’ Each party of a contract should be able to give and receive something of value.
‘Consideration’ is the value given by each member of a contract which can be a promise, an act,
or a forbearance of a legal relation. Consideration should have adequacy and sufficiency.2
However, there is a difference between the two factors whereby ‘adequacy’ indicates that the
amount paid is the appropriate value and ‘sufficiency’ shows that the consideration should be
legally valid. Conversely, a contract can be binding if the promissory receives in return a
consideration that is legally sufficient and the return consideration should be legally detrimental
to the person who offers. A consideration detriment is usually mostly benefits the other party.
There is also the mutuality of obligation which ensures that both parties are bound by the
contract. The consideration given to another party should be legally sufficient for the individual
to be obligated. Giving up a right and promising future performance constitutes of valid
considerations. Nevertheless, past acts of contractors that do not have legal obligation such as
those done as favors may not be viewed as consideration for the present promises.3 A party who
voluntarily did something to the other party as a favor cannot claim it as consideration. Hence,
the exchange of consideration is what differentiates a contract from a promise making it a vital
element of contract formation.
2 Mughal, M. (2012). Law of Consideration in Contract. SSRN Electronic Journal.
3 Ibid.