1.An offer.
2.Acceptance
3.Consideration.
4.Mutuality of obligation.
5. Competency and capacity.
1. An offer is a verbal or written promise to take some action or to refrain from acting in exchange for a set of agreed upon terms. Verbal offers can be difficult to prove if the situation gives rise to a court case. This method of contracting should be avoided when possible
2. Just as offers can be verbal (though it's not recommended), acceptance can also be done verbally. In business contracts, the terms are almost always handled in writing so that they are clear. In order to make sure everyone understands the terms, the offer should clearly lay out the points that involve acceptance, such as expiration dates, rights of revocation, and the appropriate forms of acceptance.
3. Consideration is the value that each party brings to a contract. This might be monetary, or it may take the form of a promise to carry out a particular act. Performing an act can be defined as something a party is expected to do or something the party is expected to refrain from doing. These expectations should be spelled out clearly rather than left up to the law to interpret.
4. The mutuality of obligation is the binding agreement between the parties to the terms of consideration. If one party holds more leverage, such as a right to cancel, a court may consider whether or not mutuality of obligation has been met. If it is not met, the court can invalidate the contract.
5. The contract requires that each party be legally competent and have the capacity to agree to the terms. Minors and people with limited mental capacity are not considered competent. A court will usually find that such a party does not have the capacity to enter into a legally binding contract.