CapacityEach party must have the legal ability to enter into the contract. Under Louisiana law, all persons have capacity to contract except unemancipated minors, interdicts and persons deprived of reason at the time of contracting. When one person does not have the capacity to enter into a legally binding contract, the contract may be considered unenforceable. This may mean that there are no consequences if one person does not uphold their end of the agreement.
ConsentA contract is formed by consent of the parties established through offer and acceptance. Unless the law mandates a particular form, offer and acceptance may be made orally in writing or by action or inaction that indicates consent. An example of a contract that requires a particular form is for the transfer of immovable property. An act of sale transferring immovable property must be in writing and signed in the presence of a notary and two witnesses. Such a form is known as an authentic act.
Lawful CauseCause (also referred to as consideration at common law) is the reason why a party obligates himself. However, cause must be lawful, and the cause of an obligation is unlawful when the enforcement of the obligation would result in a violation of the law or public policy. An example of a contract for unlawful cause would be a contract for where a non-lawyer agrees to provide legal services.
Lawful ObjectParties may contract for any object that is lawful, possible and determined or determinable. Contracts for objects that are illegal, impossible or offend public policy are unenforceable. A simple example of a contract that is unenforceable for unlawful object would be an agreement to purchase stolen property.
Businesses need to understand the basic elements of business contract in order to fully appreciate their obligations and ensure that what is executed is legally binding. The above information can help anyone who is considering a contract so they can understand exactly what they’re reading and what they need to look for in the contract.