Elements that Make a Valid Contract

Elements that Make a Valid Contract

If you are a landlord and/or a homeowner you probably already know that real estate transactions are complex. As an informed consumer, you are well aware that every transaction needs an iron-clad contract. A good lawyer should be able to sort out contractual details. But, what do you need to get ready for that first meeting? What should you be looking for in the paperwork? And what are the elements that make a valid contract?

What to expect when you meet with your lawyer

When you meet with your lawyer, you will be discussing the construction of a written contract. Whether you are drafting a tenancy agreement, a lease option, or a real-estate purchase contract, you will need to come into the meeting with a clear idea of what you’d like or expect from the contract itself. A fancy word for this is a consensus ad idem, otherwise known as a ‘meeting of the minds’. With the help of your lawyer, you and the other party must lay out your intentions so that there is a common understanding of the terms. Your lawyer will help you put these ideas into contractual language. No need to learn all the legal jargon before you arrive! Your ultimate goal will be to arrive at an acceptance of the offer. Written contracts are normally valid for as long has been agreed on, or until cancelled.

The elements that constitute a contract

There are a few different elements that help make up a valid contract. We are not lawyers, but we can still give you the low-down on what you’d expect your lawyer to be able to help with. Most legal sources agree that all contracts must meet a standard set of between five and seven criteria.

The Offer

A promise is made by one party that provides precise details of what is to be upheld in the written contract. Without an offer, there can be no contract. That’s why it’s important that you know exactly what you want to get out of your agreement. For example, you may want to sell your property for a certain sum, so as part of your offer, you would state in written terms what you would like the buyer to pay. You are essentially “offering” the house to them for a certain fee. There are several reasons why offers get rejected. Depending on circumstances, they can be revoked or expire. The other party may produce a counter-offer if they have rejected the initial offer. Obviously, in cases of death, the offer becomes invalid, unless there is a particular clause in the contract that states otherwise.


If the offer has been made very clear, and both parties agree on the terms and conditions, an acceptance is the next step. The offer, in your case, will be accepted via written agreement. So, for example, if you have offered a certain price and the buyer agrees to pay this price, then your contract has now been made!


In simple terms, this means that the other party will be giving something back–something that is of benefit to you. It will be written into the contract as part of the acceptance agreement. It is the “price paid” for your promise. This “price” may not always be money. It may be a benefit given or a right that has been granted. Either way, it is the consideration that makes the contract binding. For example, say you accidentally knocked down and destroyed a part of your neighbor’s fence. You could legally agree to fix the fence for him if he promises not to sue you for damages. The consideration is good for both of you—your neighbor gets a brand new fence and you don’t get sued. Win win!

Legal Capacity & Competency of Persons

In order to form a binding agreement, you and the other party must be able to prove that you have the legal capacity to do so. Just like how you can’t drive a car until you are 16, or have a legal drink until you are 21, there are rules on who can enter into a legal agreement. You must be over the age of 18, you must not be intoxicated at the time of signing, and you must be of sound mind (not on any drugs, mind-altering medications, or have a disease that impairs your thinking processes). A lawyer will prefer that you are not currently bankrupt, as your legal standing would be harder to uphold in a court of law, but you can still technically have legal capacity.

Mutuality & Certainty

As with any legal document, it’s essential that both parties understand the content within. You and the other party must be aware of everything inside the written agreement. If the other party decides to challenge anything, they will be able to do so with supporting evidence. To avoid confusion, your lawyer will make sure all of the wording is clear.

Lawful Purpose

The contents of the contract and overall reason for creating the contract in the first place must be legal in itself. For example, any contract that involves committing a crime is off limits. Whether it’s extortion, defrauding the government/ public institutions, or a physical or sexual crime, these types of contracts are not legal. They would not be permissible in a court of law.

Specific elements to look out for in Wisconsin

Each state has its own interpretation of how contracts work, but most states agree on the fundamentals. Here in Wisconsin, it’s important to understand what paperwork you need. Most states, including Wisconsin, require that you disclose certain information to the seller before any contracts are signed. This is called a “Real Estate Condition Report.” In this report, you will detail anything that is “worth noting” about the property in order to create awareness of those items or conditions. Your lawyer will be able to advise on the best way to approach it. Once the report has been seen by the other party, you will be able to proceed with the formation of the contract.

Please remember… we’re not lawyers… and we don’t pretend to be. The elements that make a valid contract will be easier to implement with a real-estate attorney present. Always talk with them before putting together a contract or entering into any legally binding agreement.

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