Elements of a Contract | Essentials to Include

Nikita M.

Media-savvy content creator, with a curiosity for all Salesforce experiences.

Updated: Jan 13th, 2025

Wouldn’t you want to know whether the agreement you are entering into is legally enforceable? According to a study conducted by the International Association for Contract and Commercial Management (IACCM), 9% of contracts end in misunderstandings. The disputes between the parties in an agreement are due to the vague terms and conditions laid out in a contract’s elements. 

In the article below, we cover the elements of a contract to help you determine what makes these documents legally binding because we feel it’s important to teach people how to create or identify contracts with valid information. 

The quicker you know how to spot a valid contract, the better your chances are of avoiding future disputes with partners. You also get the peace of mind that comes with knowing you are legally protected in the event of misunderstandings. 

Does this sound interesting to you? Let’s start with “What are the elements of a valid contract?”

Elements of a Valid Contract

There are a few key elements that are required to make a contract valid. All businesses want valid contracts since they ensure the terms and conditions of an agreement are enforceable by the laws of the country in which they operate. Let’s take a look at the essential elements of a contract below. 

1. Offer

This element is added to a contract to show readers that one party, also known as the offeror, is making a proposal to another, the offeree. The intention of the offeror is to ensure the proposal is formal and that all parties involved are bound to the terms and conditions laid out in their contract. In the offer section, the following terms need to be addressed:

What the offeror will PROVIDE.

What will the offeror DO, like perform a service?

The CONDITIONS of the proposal.

Once the offer is finalized, the offeror must communicate this to the offeree, who will decide whether to accept or reject the proposal. Sometimes, the offeree might want to counter the offer to improve the deal. 

2. Acceptance

This element is the offeree’s unqualified agreement to the offer on the table. However, this decision needs to be communicated to the offeror. The acceptance element must follow the “mirror image” rule, which enforces it to match the terms of the offer.

If the offeree does not follow this rule, they would be offering a counteroffer, which is any change to the offer provided. At this stage, the offer has not been accepted. Only when an acceptance is made that matches the offer can a formally binding agreement be made. 

3. Awareness

This contract element is included to make sure all parties in an agreement understand and acknowledge its terms. When all parties sign the contract, this element will mean they willingly agree to its terms and conditions. By adding the awareness element, all parties mutually consent that the contract was not created by accident. 

4. Consideration

This element in the contract explains what is TRADED between the parties in an agreement. For example, a party may serve another party in exchange for money or goods.

5. Capacity 

A contract owner must add a capacity element to a document to show that all parties entering an agreement are legally allowed to. This section will ensure that all parties are of sound mind and legal age. 

6. Legality

This element in a contract states that the agreement’s purpose is lawful and does not violate public rules and regulations. 

Wrapping Up Contract Elements

These basic elements of a contract make an agreement valid. Therefore, it makes sense to add them to all your agreements. However, manually copying the data from a Customer Relationship Management (CRM) platform, like Salesforce, and pasting it into a contract every time you need one is time-consuming. Not to mention, the contract needs to be double-checked for typos and errors before being sent to partners or customers.

Thanks for reading our article on contracts. This time we have taken the opportunity to answer the common question of “What are the elements of a contract?” To continue your document journey in the real world and manage contracts in Salesforce, we recommend Titan CLM. 

See you soon.

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