Introductory Business Law CLEP Prep Practice Exam

What are the three elements of a valid contract?

1. Offer, agreement, and consideration

2. Offer, acceptance, and consideration

3. Offer, acceptance, and performance

4. Agreement, consideration, and performance

The correct answer is: Offer, acceptance, and consideration

A contract is a legally binding agreement between two or more parties. In order for a contract to be considered valid, it must have three essential elements offer, acceptance, and consideration. An offer is a proposal made by one party to another, outlining the terms and conditions of the contract. Without a clear and unambiguous offer, there can be no valid contract. Acceptance is the expression of agreement by the other party to the offer. It must be communicated in a manner consistent with the terms of the offer and must be unconditional. Consideration refers to something of value that is given by each party in exchange for the promises made in the contract. Consideration can be in the form of money, goods, services, or even a promise to do or not do something in the future. Option A is incorrect because it mistakenly includes "agreement" instead of