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5 contractual elements you need to know - from our Contract Management Services

Updated: Nov 6, 2019



There is a lot more to procurement and purchasing then just placing orders or issuing supply contracts.

As procurement officers we are not required to be experts in contractual law, this is why we engage lawyers, however, we must have a sound understanding and application of contractual laws.


Some people think that contractual law only apply to supply contracts, but in fact it also applies to purchase orders we issue daily as they also form a contractual agreement.


In plain English, here are the 5 main essential elements that must be proved to show the formation of a legally binding contract;

(1) Offer, also known as a Legal Purpose;

The offer of a contract must be provided for under legal conditions. The contract cannot be valid if the conditions of the offer are outside the law. For example, hiring stolen equipment is not legally accepted, which renders the contract unenforceable.


(2) Acceptance, also known as Mutual Acceptance

A contract must be accepted in full by both parties, which is known as “meeting of minds”. The offer and acceptance must occur in accordance with the conditions established by the parties, and fully accepted by everyone in the transaction.


(3) Consideration;

Each party must accept that it has value, and that value has a counterpart. The value of the contract is assumed by the contracting party that accepts the proposal


(4) Mutuality of obligation, also known as Voluntary Acceptance

Each party must be of sound mind and must accept it freely. The offer needs to be clear and all parties are aware of their obligations spontaneously.


(5) Competency and capacity, also known as Competent Parties

The parties to a contract need to be able to hire. Restrictions such as age, mental state, use of substances that can alter understanding make a contract non and void and ineffective.

At first glance, you must be able to find these requirements when signing a legal document on paper or electronically.


And, in certain circumstances (6) a written instrument, such as a purchase order or supply agreement for the supply of commodities and/or services.


It must also be noted that every country has their own laws and regulations, so make sure you seek legal advice when dealing with other countries.


Disclaimer: This article is based on my own understanding and interpretation of contractual law and is not legal advice and should not be taken as such.


#procurement #purchasing # contract # consultant

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