What are the essential elements of a contract?

The essential elements of a contract are: offer, acceptance and legal consideration. The offer should express the willingness to enter a contract.

These essential elements are explained below:
The offer has to express the willingness of a party to enter a bargain or a contract. The offer usually has a date until it is valid. However, if the date is not present, then it is valid until accepted or rejected. Once rejected, the offer is not valid any more. So if a party offers a house for sale and another party rejects the offer because the price seems too high, then the seller has the right to refuse to sell the house at the given price if the buyer changes his mind and calls back to negotiate.

Whether a statement is an offer or not, when considered in the court several points are important: If the offer points any quantity, price, place of delivery, or other specifications concerning the stock for sale (like quality and measures). The general rule is that it must be a reasonable under the circumstances.
For example if a merchant offers pipes for sale and in Craigslist there is an offer stating "Pipes for sale. 24-36 gauge, $3.60 per foot, it will be considered an offer although the quantity is not mentioned. The statement "I am selling pipes" with a phone number will not be considered an offer.

If the offer is accepted and a partial payment is made, then both of the parties are obliged to follow through the agreement. The offer may or may not be in writing. A contract may or may not be in writing also. However, the terms are more difficult to argue when in writing.

Offers for goods that cost more than $500, real estate offers, and transactions that can not be completed in one year by law have to be in writing. That is according to statute of frauds.

If an offer is accepted with some changes then the original offer is terminated and the new offer is valid. It is called counteroffer and the first offerer may or may not accept it.
An offer becomes irrevocable when the side accepting the offer performs his obligations

When the offerer is paid to keep the offer open for certain time and when there is a firm offer under sec. 2-205 of the Uniform Commercial Code. This kind of offer can only stay open 90 days. It does not need consideration. It must be in writing.

2. Acceptance

When a buyer accepts the offer, keeps the goods or fails to reject them in a limited time, then the offer is considered accepted. There are three types of acceptance:

-Conditional acceptance- When a contract is made under certain conditions. This kind of acceptance usually counts as counteroffer and is valid only if the other side agrees. Conditional acceptance is also when a side agrees to pay after good is delivered on certain date at certain location
-Expressed acceptance- this kind of acceptance is a direct acceptance of the offer, without any changes or additions.

-Implied acceptance- An implied acceptance is when the party implies with conduct that he accepts the offer. If a cosmetic product is sent to a customer and the customer fails to return it in the period he agreed to return it if he does not like it, he actually accepts the product and is obligated to pay it.

There are many firms operating on this principals and even insurance companies are making money on the fact that the customers forget to cancel the offer on time.

3. Consideration

Consideration is when a party agrees to the terms of a contract. In the past shaking hands was the expression of consideration. This is so called "closure" of a contract. In our complicated times when there are many different contracts consideration may have a very different expression. For example when there is a contract between two parties that the first one will get paid after he builds a house on certain location for certain time. If the party does build a house on the location for the time in the contract, it is expressing a consideration in action. Consideration may be a promise to do something or to refrain from doing something.
Consideration must have a value that can be objectively determined. For example the marriage binding promise to love someone is not a consideration. A person can not be charged in court for not keeping this promise because "love "is a very stretchable notion. It is not enforceable because love is subjective by nature.

From another point of view when there is a contract that is unilateral or payment is supposed to come after one party is fulfilled their promise, there are many things that may go wrong. For example, when a party promises to build a house on certain location, for certain time in exchange for a payment at the certain date when the project will be finished. Let's say that the payer does not like the quality of the house or on the date when the house is supposed to be finished, it is not. Those cases fill the courts and make the judges worth their money. In a case like this the reasonable expectations are considered in order to take a fair decision.