Leadership Letter
January 2022
ASK COUNSELOR TARA
ASCE’s General Counsel Tara Hoke responds to legal questions posed by Sections and Branches here each month. Send Tara an email with your question.
What is required to create a legally binding contract?
Do you know what is required to create a legally binding contract? While your mental picture of a contract might include pages of fine print with handwritten signatures at the end, in many cases a “contract” can be formed through a series of email exchanges, a click of a button, or even a face-to-face conversation. To avoid misunderstandings about whether or not a contract has been created, it’s helpful to know the basic elements of a legally enforceable agreement.

  1. Offer: The process begins with one party communicating an offer. The offer must involve sufficient details of the intended transaction and must show a genuine desire to create a contract. For example, a joking offer to “give anything for a slice of pizza right now,” is likely to fall short both on specificity and on a genuine intent to be bound.
  2. Acceptance: Second, the offer must be accepted. In general, this means acceptance of the offer as presented; any changes are considered to be a rejection of the original offer and the making of a new “counteroffer” (which can then be accepted by the original offeror). 
  3. Consideration: Finally, there must be a mutual exchange of promises between the parties. While a court will generally not substitute its own judgment on whether the promises are of equal value (e.g., one person’s worthless junk is another’s valued collectible), a purely one-sided promise or agreement is not enforceable.
While these three elements may seem straightforward, it should not be surprising that these elements may be less simple in practice. For example, while an offer can generally be withdrawn until it has been accepted by the other party, be wary of “letters of intent” or similar offers that could potentially be interpreted as a contractual commitment to execute a contract. And even in cases where a contract failed on one or more of the three elements, if a party reasonably believes the contract is valid and acts in reliance on it, the other party may be precluded from arguing that the agreement was invalid.

Other factors that affect the enforceability of a contract – e.g., mistakes, capacity, duress – will be covered in a future column..