The 8 Elements of Valid Contracts for Contract Management

Most professional relationships are built on a contract. A contract is an agreement that connects all parties, whether they’re negotiating or finalizing a deal.

A clear, legally enforceable contract creates a strong foundation for business relationships. It helps prevent conflicts and builds trust. While contracts can vary in length and complexity, they all share some key elements:

• Definition
• Legality
• Capacity
• Offer
• Consideration
• Intention
• Certainty
• Acceptance

Let’s take a closer look at each of these!

​Essential Parts of a Valid Contract

Understanding the key elements of a valid contract is crucial for creating agreements that legally bind all parties. Missing even one element can make a contract invalid. Digital contract tools, like those from SP Marketplace, can help ensure every element is covered, making contract management easier and more effective.

What Is a Contract?

A contract is the foundation of any business or professional relationship. It defines the legal obligations and responsibilities of all parties involved. This document officially connects the parties, explaining their rights and duties. Contracts can take different forms, but all must include the following elements to be valid and enforceable:

• Legality
• Capacity
• Offer
• Consideration
• Intention
• Certainty
• Acceptance

If any of these elements are missing, the contract might not hold up legally.

​Simplify Contract Management with Tools Like SP Contract Tracker

Tools like SP Contract Tracker make managing contracts easier and more reliable. For example, you can use pre-made templates tailored to different contract types, such as sales, services, or partnerships. These templates ensure all key elements are included, giving you confidence that your contracts are valid and enforceable. With a strong foundation, you can enter business relationships with peace of mind.

Legality: What Laws Apply?

The legality of a contract decides which laws and rules apply to it. These laws can differ between states, countries, or regions. This affects how contracts are written and followed.

For example, some places accept e-signatures, while others don’t. If the contract is in an area where digital signing is allowed, both parties can sign electronically. But if handwritten signatures are required, the contract must be signed on paper.

Simplifying Legal Requirements

​Using software with pre-approved clauses can make it easier to handle the legal differences in different areas. Tools like SP Contract Tracker include clauses designed to meet the legal standards of various regions. These clauses align with local laws, dispute resolution methods, and other legal requirements.

With this software, you can ensure your contracts follow the rules of different jurisdictions, lowering risks and making compliance simple.

Capacity: Can Everyone Legally Agree?

Capacity means that a person can legally meet the conditions of a contract. The rules for this can vary depending on the city, state, or country. Key factors include age, mental soundness, and language ability.

For example, in most U.S. states, someone must be at least 18 years old to sign a contract. However, the rules can differ from state to state. If a person doesn’t have the legal capacity, the contract may be invalid and could be declared void later.

​Simplifying Approvals with SP Contract Tracker

SP Contract Tracker makes managing contract approvals easier by routing them to the right people based on the contract type. For instance:

• Some contracts may need approval from higher management or legal advisors.
• Others might require sign-off from specific department heads or managers.

Using predefined approvers reduces mistakes and confusion. It ensures that only authorized individuals with the legal capacity to sign are involved, keeping everything in line with the law.

Offer: What Is Being Proposed?

A contract is formed when one party offers something, and the other agrees to provide it. The contract must clearly outline the duties and responsibilities of both parties, as well as the exchange of assets, money, or actions. It should also explain what is being offered, how and when it will be exchanged, the costs involved, and what happens if someone doesn’t follow the agreement.

If these details are missing, the contract might be invalid or lead to legal issues. For example, an employment contract should specify the notice period. If it’s not included and isn’t covered by law, an employee could quit without facing legal barriers.

​Ensuring Clarity with Contract Review

Using contract management software helps ensure every detail is covered. The contract evaluation feature checks that all essential information, clauses, and provisions are included. This review acts as a safeguard to prevent mistakes or missing details that could cause legal problems.

With this software, you can be confident that the contract clearly defines:

• What is being offered.
• How and when it will be exchanged.
• The costs involved.
• Responsibilities of each party.
• Consequences for not following the agreement.

This makes the contract binding, clear, and fair for everyone involved.

Consideration: What Does Each Side Gain?

For a contract to be valid, both parties must receive something of value, called consideration. This could be money, goods, services, assets, or even protection. Consideration doesn’t always have to be financial—for example, tutors exchanging knowledge can also count.

Without legal consideration, a contract is considered "voluntary." This means that if one party doesn’t fulfill their part of the agreement, the other party has little or no legal recourse.

Intention: Do Both Parties Want to Work Together?

Intention, also called mutuality, shows that all parties want to enter into a business relationship. For a contract to be legally binding, everyone involved must agree. A written contract is the easiest way to prove this intent, as it records all the terms and conditions agreed upon.

Certainty: Does the Contract Make Sense?

​To reduce the chance of misunderstandings, contracts must clearly state who is involved and list all essential and optional terms. Naming the parties ensures the contract only applies to those directly involved.

To improve clarity, include detailed descriptions of the goods or services each party will provide. Adding specific identifying details also helps make the terms more certain and easier to enforce.

Acceptance: Is Everyone in Agreement?

Acceptance happens when all parties agree to the contract terms. In written contracts, this is shown by signing the document. For verbal agreements, acceptance can be demonstrated when someone starts fulfilling their obligations under the contract.

Mutual agreement is key. If one party can prove there wasn’t a shared understanding, the contract might not be enforceable. That’s why it’s essential to keep a clear record of the agreement and its terms.

​Simplifying Acceptance with SP Contract Tracker

Contract management software, like SP Contract Tracker, helps ensure smooth acceptance by capturing all agreement details. Whether contracts are signed electronically with eSignatures or physically, the software records important metadata, including:

• The date and time of the agreement.
• The identity of those who signed.
• Other critical details.

This creates a reliable record of acceptance, reducing the risk of disputes or confusion. Even for verbal agreements, the software can track and document how acceptance was shown, such as through actions fulfilling the contract terms. This ensures clarity and helps avoid ambiguity.