What constitutes a legally binding business contract?

Home /

Blog /

What Constitutes A Legally Binding Business Contract

Contracts are often the backbone of most business dealings in New Jersey. Therefore, it can help for business owners in the Haddonfield area to have a basic understanding of what constitutes a legally binding contract. The following elements must be met for a contract to be enforceable.

Elements of an enforceable contract

First, one party to the contract must make a specific offer to the other party, and second, the other party must accept that specific offer. The offer and acceptance must be made of the parties’ own free will, absent of coercion or force. Third, the parties must be mutually consenting to the same terms in the contract.

Fourth, there must be consideration. This is a legal way of saying that something of value was exchanged between both sides to the contract. This may include either money or services. Gifts, in which only one party is exchanging something for nothing other than perhaps gratitude do not constitute a legally binding contract.

Fifth, both parties must be of “sound mind” to enter into a contract. This means they understand what they are agreeing to. Minors cannot consent to a contract and if one or both parties are inebriated or mentally deficient, they cannot consent to a contract.

Finally, the contract cannot be made for an illegal purpose. For example, an agreement to sell drugs would not be legally enforceable, because selling drugs is not legal.

Seek help before entering into a business contract

It is important to note that entering into a contract that does not meet all these elements is not illegal in and of itself; it just means the contract cannot be legally enforced if there is a dispute. However, this post does not contain legal advice, so those interested in executing of a contract may want to seek the assistance of an attorney to ensure they understand what they are agreeing to and that the final document is legally sound.


Michael Ritigstein is a Founding Partner of the firm concentrating his efforts in supporting the firm's litigation, corporate and estate matters. Mr. Ritigstein graduated from the University of Delaware in 1996 and Seton Hall University School of Law in 2000. In 2007 he received a Masters of Law in Taxation with a concentration in Estate Planning, from Temple University's Beasley School of Law.

Meet Your Attorney


Attorney Mike took our call & agreed to meet with us for a free consultation. During our meeting he was very thorough in explaining the legal process, approach, cost, and time needed for our case. His fee was very reasonable. I would definitely recommend him to others. You certainly will not regret it should you decide to use his services.
— R. Maraj