Overview

Valid contracts arise only when the parties meet specific formation requirements: a clear offer, an unequivocal acceptance, mutual assent, consideration, and legal capacity. This topic focuses on how offers are made and accepted, how capacity can invalidate agreements, and special rules such as mailbox acceptance and minors’ right to disaffirm.

Key Formation Rules

• Offer Requirements: Serious intent, definite terms, and proper communication to the offeree.
• Termination of Offer: Revocation, rejection, counter‑offer, lapse of time, operation of law.
• Acceptance Methods: Mirror‑image rule (common law), UCC 2‑207 battle‑of‑the‑forms, mailbox rule timing.
• Mutual Assent: Objective test—would a reasonable person believe the parties agreed?
• Capacity Categories: Minors, intoxicated persons, mentally incapacitated individuals, and corporations beyond ultra vires acts.
• Effect of Lack of Capacity: Contracts are void, voidable, or enforceable upon ratification once capacity restored.

Step‑by‑Step Example

Scenario: Sixteen‑year‑old Jake buys a used motorcycle for $2,000. Two months later, he crashes it and seeks to return the bike for a refund, claiming minority.

Step 1 – Capacity Analysis: Contracts by minors are generally voidable at the minor’s option.

Step 2 – Disaffirmance Timing: Jake may disaffirm during minority or within a reasonable time after turning 18.

Step 3 – Restoration Duty: Most states require only that the minor return the goods in whatever condition; some require restitution for depreciation.

Step 4 – Result: Jake can void the contract and recover the $2,000 (minus any statutory offset for damage, depending on jurisdiction).

Answer: Because Jake lacked legal capacity, the motorcycle contract is voidable at his election; the seller bears the loss.

Quick Tip