When is a contract valid?
The following is for general information only, and does not represent legal or other type of advice. It is always best to consult your lawyer before signing any contracts.

There are 6 essential elements that need to be present for a contract to be enforceable and binding: 

A) Capacity of the parties
            1.       The participants to the contract signing must be people:

2.       who are over the age of majority,

3.       who are mentally competent –which could involve either their brain capacity to understand or the artificial incapacitation of drugs, chemicals or alcohol

4.       who are not illiterates, they must understand the language and meaning of what they sign 

5.       and they must have the authority to perform this transaction or sale.

 B) Lawful Object

1.       The transaction must be lawful in nature,

It cannot be:

2.       Illegal by Statute or Common Law,

3.       Contrary to public policy or good morals,

4.       Unsafe to the state or public service,

5.       Tending to pervert justice or abusive of the legal system,

6.       Against the Competition Act or The Income Tax Act,

7.       In restraint of  personal liberty or marriage or related to gambling, for the commission of a criminal offense or civil wrong.

 C) Consideration:
1.       There must be an exchange- a bargain made -, a promise for a promise, an act for a promise, a promise for an act,
2.       Consideration can be monetary, or other object of value to both the parties.
3.       Consideration can also be made under seal.

 D) There must be an offer, mutual unconditional acceptance and agreement:  

             The offer:

1.       The offer must be definite in terms,

2.       It must be made to someone else

3.       It must remain open for acceptance for a reasonable amount of time.

4.       It may be revoked or withdrawn only prior to acceptance, subject to limitations.

5.       It must be communicated to the offeree within the time limit of the said contract. 

             The acceptance:

1.       It must be unconditionally accepted as finally agreed.

2.       It must be communicated back to the offeror.

3.       Made in the manner required by the offeror.

4.       Made within the time limit required by the offeror.

 E) There must be genuine intention to perform what is in the contract.

1.       There cannot be inducements (as in under the table arrangements) 

2.       Misrepresentation (especially when advertising)

3.       Undue influence

4.       Or failure to disclose possible detrimental facts or personal gain.

F) The terms of the agreement must be definite and clear:

1.       Dates of acceptance and of execution are of the utmost importance.

2.       This prevents possible misinterpretation and future problems and disputes.  

These characteristics of a valid contract are only some of the requirements in simple person to person contracts. The more involved commercial contracts have more involved requirements and seeking legal advice is always the best policy.

As you can see, there is a lot more to a contract than just signing on the dotted line.

Always seek legal advice before signing a contract.

This information has been interpreted from the Real Estate Encyclopedia – Canadian Edition /2004