What Are the Basic Principles of Contract Law?

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  • Written By: Renee Booker
  • Edited By: E. E. Hubbard
  • Last Modified Date: 31 January 2020
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As with many legal principles, the basic principles of contract law will vary by jurisdiction. Within the United States, a contract requires an offer, an acceptance, and consideration in order to be documented as a valid contract. Additional principles of contract law within the United States include issues surrounding the capacity to enter into a contract, the legality of the purpose of the contract and something known as the "four corners doctrine."

The first step in forming a valid contract is that an offer must be made by one of the parties. A common example is in the sale of a property. The purchaser must make an offer to purchase the property. The offer may include as many or as few terms as the parties choose, but it must include a concrete offer.

Next, the contract must be accepted. Again, in the sale of a property example, the seller must affirmatively accept the offer. The original offer must be accepted as written or spoken. A counteroffer is not considered an acceptance of the original offer. When determining whether or not there was an offer and acceptance, most courts look for a meeting of the minds or a concurrence of wills to decide if the offer-and-acceptance requirements have been met.


Finally, the principles of contract law require that consideration be given for the contract to be valid. Consideration means that something of value was given to one party by the other. Usually, the consideration is money or something else of obvious value. In some cases, however, consideration can take the form of refraining from doing something that the party is otherwise entitled to do. The consideration given must be sufficient, but need not be adequate to validate the contract.

The capacity to enter into a contract can also be considered one of the principles of contract law. Capacity may be affected by many factors. Minors, for instance, do not have the legal capacity to contract. A person's mental state may also be considered when determining whether the person had the requisite capacity to enter into a valid contract.

Many courts also look to the legality of a contract when determining its validity. If a contract requires someone to do something illegal, then it is considered void on its face. Entering into a contract to kill someone, for example, would not be a valid contract since homicide is illegal.

Courts often use the "four corners doctrine" when considering a contract dispute. The principles of contract law generally require the parties to a contract to include all the terms and considerations within the "four corners" of the document. Contracts are not required to be in writing, but, when they are, courts will generally not consider external factors when interpreting the contract itself. Instead, the courts will only look to what was included within the written contract, or the "four corners."


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