Contract Formation

In one sentence

The process by which parties create a legally binding agreement.

Plain English

Contract formation requires three basic elements: an offer (one party proposes a deal), acceptance (the other party agrees to the exact terms), and consideration (something of value exchanged by both sides). When all three elements are present, a binding contract exists. The parties must also intend to be legally bound and agree on the essential terms.

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Example

Marcus texts his neighbor offering to sell his used bike for $100. The neighbor replies 'I accept.' At that moment, a contract forms because there was an offer, acceptance, and consideration (the bike and money).

Used in a sentence

“Contract formation occurs when the buyer clicks 'I agree' to the online seller's terms and conditions.”

Related terms

Contract

A legally binding agreement between two or more parties to do or not do something.

Assent

A party's agreement to the terms of a contract.

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

Consideration

Something of value exchanged by each party to make a contract binding.

intent

The defendant's conscious purpose or knowledge that their actions would cause a particular result.

Offeror

The person who makes an offer to enter into a contract.

Offeree

The person who receives an offer and has the power to accept or reject it.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.