Oregon 30-Hour Real Estate Law Practice Test

What is typically required for a contract to be valid?

1. Only written documentation

2. Mutual consent and capacity

3. Majority approval

4. Corporate verification

The correct answer is: Mutual consent and capacity

A contract is considered valid when it meets several essential criteria, with mutual consent and capacity being two of the most fundamental. Mutual consent means that both parties must agree to the terms of the contract, demonstrating a clear understanding and acceptance of what is being offered and accepted. This agreement is often evidenced by an offer and an acceptance, ensuring that all parties are on the same page regarding the contract's conditions. Capacity refers to the legal ability of the parties to enter into a contract, which can be influenced by age, mental competence, and other factors. For example, individuals must be of sound mind and of legal age in order to consent to the agreement. If either party lacks the capacity, the contract may be voidable. While written documentation can serve to clarify and solidify the terms of a contract, not all contracts are required to be in writing to be valid; many oral contracts are enforceable too, depending on the context and subject matter. Majority approval and corporate verification may apply in specific instances or types of contracts but are not universally required for a contract’s validity. Thus, the combination of mutual consent and capacity is crucial for establishing a legally binding agreement.