12.1 Elements of a Valid, Enforceable Contract

The Paralegal CORE Competency Exam (PCCE) tests contracts as a labeling-and-elements skill. Domain 2 asks whether a deal ever became a contract, which piece is missing, and what a paralegal should flag before anyone treats the file as enforceable. Later sections in this chapter cover defenses, discharge, remedies, and the Uniform Commercial Code (UCC). This section is formation: offer, acceptance, consideration, mutual assent, capacity, legality, and the classification words the blueprint uses.

A contract is a legally enforceable agreement. An understanding that is missing an element may be a social promise, an unenforceable conversation, or a void or voidable transaction — it is not a fully enforceable contract. Courts use an objective theory: they look at outward words and conduct, not at a party's secret, unexpressed intent. Lucy v. Zehmer is the classic illustration. A seller who appears to offer a farm in earnest, and who signs a writing the buyer reasonably treats as serious, is not saved by a later claim that it was only a joke over drinks. If a reasonable person in the other party's position would understand a present commitment, the speaker is ordinarily bound.

Offer

An offer is a manifestation of willingness to enter a bargain, so made as to justify another person in understanding that assent is invited and will conclude the deal (Restatement (Second) of Contracts § 24). Three pieces must be present.

Intent. The offeror must appear to intend to be bound now, not later. Ordinary price quotes, advertisements, catalogs, and invitations to bid are invitations to deal, not offers — unless the ad is clear, definite, and leaves nothing open (the classic first-come, first-served, one-item advertisement). Puffery ("this is the best truck in town") is not an offer. Preliminary negotiations ("I might take $40,000") are not offers.

Definiteness. Essential terms must be clear enough for a court to know what to enforce: the parties, the subject matter, quantity, and — especially at common law — price and time. Land and services contracts are stricter about a missing price. UCC Article 2 is more forgiving for the sale of goods: a contract does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for a remedy (UCC 2-204). Quantity is the term Article 2 will not invent.

Communication. The offer must reach the offeree. A person who has not been offered a deal cannot accept it. Overheard private talk is not an offer to the eavesdropper.

How an ordinary offer dies

Until acceptance, an ordinary offer is fragile. It terminates by:

1. Revocation — the offeror withdraws. Revocation is effective when the offeree receives it, directly or through a reliable source. A public offer is revoked the way it was made.
2. Rejection — the offeree says no.
3. Counteroffer — a proposed different deal. A counteroffer both rejects the original offer and creates a new offer. A mere inquiry ("would you take $90?") is not a counteroffer.
4. Lapse — the time stated in the offer expires, or a reasonable time passes.
5. Death or incapacity of offeror or offeree, destruction of the essential subject matter, or supervening illegality.

Exam trap: a secret, uncommunicated change of mind is not a revocation. Death terminates an ordinary offer even if the offeree does not yet know. Death does not terminate a valid option contract.

Acceptance

Acceptance is the offeree's manifestation of assent to the terms of the offer, in the manner invited. Only the offeree may accept. The mailbox rule (deposited-acceptance rule) generally makes an acceptance effective on proper dispatch, but a rejection or revocation is effective on receipt, and the offer can specify that acceptance is effective only when received.

Common law: the mirror-image rule. Acceptance must match the offer. Any material variation is a counteroffer, not an acceptance. A services or land "acceptance" that changes the closing date or the price is not an acceptance.

UCC 2-207 — battle of the forms (conceptually). Between merchants swapping purchase orders and acknowledgments, a definite and seasonable expression of acceptance can operate as an acceptance even though it states additional or different terms, unless acceptance is expressly made conditional on assent to those terms. Additional terms are proposals. Between merchants, they become part of the contract unless the offer limits acceptance to its own terms, the terms materially alter the deal (a typical warranty disclaimer or arbitration clause often does), or the offeror objects in time. Do not recite every 2-207 subsection on the exam. Know the contrast: common law = mirror; Article 2 = a definite acceptance can still form a contract.

Silence is not acceptance unless prior dealings or the offer make it so, or the offeree takes the benefit of offered services with a reasonable chance to reject them.

Consideration

Consideration is a bargained-for exchange of legal value — a promise, act, or forbearance given in exchange for the other promise (Restatement § 71). Courts generally do not police adequacy; a peppercorn can suffice if it was truly bargained for. Three nonstarters:

• Past consideration. A promise to pay for something already done ("you saved my dog last year, so I will pay you $500") is not bargained for.
• Illusory promise. "I will buy as many as I feel like" reserves total discretion and is not a commitment. Compare a real requirements or output contract under UCC 2-306, which is bounded by good faith and is not illusory.
• Preexisting duty. Doing only what one is already legally obligated to do — a police officer making an arrest; a contractor finishing the original job for more money with no new bargain — is not new consideration at common law. Modifications of a goods contract need no new consideration if made in good faith (UCC 2-209). That is an Article 2 difference, not the common-law default.

A promise not to sue on a colorable claim can be consideration (forbearance). A seal is not a modern substitute on a national exam unless the stem supplies a statute.

Mutual assent, capacity, and legality

Mutual assent is the agreement itself — offer plus acceptance under the objective test. If the parties attach materially different meanings and neither knows or has reason to know the other's meaning, there may be no contract (Raffles v. Wichelhaus, the two ships Peerless). That is a formation failure, not merely a later defense.

Capacity. Minors' contracts are generally voidable by the minor (necessaries are a limited exception). Mental incompetence and intoxication that the other party has reason to know can also make a contract voidable. A voidable contract can be ratified once capacity exists.

Legality. The object and consideration must be lawful and not contrary to public policy. An agreement to commit a crime, restrain trade unreasonably, or evade a licensing statute in a way the jurisdiction treats as illegal is void or unenforceable. Illegality returns with other defenses in section 12.2; flag it at formation.

Classifications the blueprint uses

Do not call a quasi-contract an implied-in-fact contract. One is a court-imposed obligation; the other is a real agreement proved by conduct.

Option contracts

An option contract is a separate promise to keep an offer open for a stated time. It requires its own consideration at common law (even a modest payment). While the option is outstanding, the offeror cannot revoke, and death does not kill the option. A UCC 2-205 firm offer — a merchant's signed written assurance that a goods offer will be held open — is irrevocable without consideration for the time stated, not to exceed three months. Section 12.4 returns to 2-205. On a formation item, the point is: an ordinary offer is revocable; an option or firm offer is not.

The paralegal's formation checklist

Before anyone calls the file "the contract," tick:

1. Who is the offeror and who is the offeree? Was the communication an offer or an invitation to deal?
2. Is the offer still live, or did revocation, rejection, counteroffer, lapse, or death intervene?
3. Did acceptance mirror the offer (common law), or is this a goods deal under 2-207?
4. What was bargained for? Flag past consideration, illusory language, and preexisting-duty modifications.
5. Capacity and legality. Minor? Unlicensed contractor? Illegal object?
6. Classification: bilateral or unilateral; express or implied; executed or executory; is there a paid option?

Worked path. A client emails a painter: "Paint my office suite next month for $8,000; this offer is open until Friday." The painter replies Thursday: "I accept for $8,500 and I will start in two months." That reply is a counteroffer under the mirror-image rule — this is a services deal, not Article 2 goods — so the original $8,000 offer is dead. If the painter had instead mailed a clean "I accept" on Thursday, the mailbox rule would generally bind the client even if a revocation crossed in the mail after dispatch. If the client had taken $50 "to hold the $8,000 price until Friday," that is an option; a Thursday revocation would fail.