In order for a contract to be recognized as existing and valid by law, there are four elements that need to be met. The first requirement is that one of the parties to the contractual agreement has agreed to either perform or refrain from performing a specific action or actions in the future.
The second requirement is that, in exchange for either performing or refraining from performing said action, something of value has been pledged as an equitable exchange. This can take many forms and is not necessarily always a monetary or financial exchange. It can also be a pledge to either perform or refrain from performing an action by the other party. This is what is referred to as consideration and is essentially the value that is the impetus behind the parties entering into the contract.
The third requirement is acceptance. It must be clearly established that the all parties accepted the terms of the contract. Acceptance can be demonstrated through words or even actions that are called for in the offer. Essentially acceptance usually mirrors the terms of the offer. If they are not, then the acceptance could be construed as a rejection and subsequent counteroffer.
Finally, there has to be what is often referred to as a meeting of the minds in reference to the terms of the contract. Simply put, this means that all parties named and involved in the contract have a basic understanding to what they have agreed to when they entered the contract.
Once all the requirements are satisfied a contract is in place. If the terms of the contractual agreement are not met then breach of the contract results and contract dispute can arise.
Source: Judicial Education Center, “Elements of a Contract,” Accessed May 25, 2015