What are the 5 criteria for a contract?

The 5 Essential Criteria for a Valid Contract

Not every promise or handshake deal holds up in court. For an agreement to be legally binding, it must meet specific criteria—otherwise, it's just a casual arrangement with no real legal weight. While the original list includes six elements, the core five often emphasized in practice are offer and acceptance, certainty of terms, consideration, intention to create legal relations, and legality of purpose.

Offer and acceptance form the foundation. One party makes a clear offer, and the other accepts it—without changes or conditions. Think of it as a “yes” to the exact terms proposed. Without this mutual agreement, there’s no contract.

Next comes certainty of terms. The contract must clearly outline what each party is expected to do. Vague promises like “I’ll sell you something later” won’t cut it. Courts need specifics—what’s being exchanged, when, and how.

Then there’s consideration—the legal term for “something of value” exchanged between parties. This could be money, services, or even a promise to do (or not do) something. It’s the give-and-take that makes a contract more than just a gift.

Intention to create legal relations separates serious agreements from social ones. If two friends agree to share lunch, there’s no intent to be legally bound. But in business deals, that intent is assumed unless stated otherwise.

Finally, the contract must have a legal purpose. No court will enforce an agreement built on illegal activity. Selling stolen goods or evading taxes? That’s not a contract—it’s a crime.

Capacity of the parties—like being of sound mind and legal age—is also crucial, but often taken as a given. Together, these elements form the backbone of enforceable agreements that protect everyone involved.