Understanding contract law is all about knowing what is really going on and acting in that capacity. Commerce is used world-wide, this is the hidden system. And everything has to be done by contract. Here are the fundamentals of a valid contract.
According to the Law of Contracts, as recognized worldwide and in Uniform Commercial Code, the four main components are:
1) The Offer
2) The Meeting of the Minds & Negotiating of Terms
4) Acceptance & Money Exchange
When you receive a bill, red light ticket, default notice, order to pay, judgement, statement by a judge, etc. these are all examples of "offers". The offer can be an official contract that you sign, for instance from a cell phone company, or a general announcement from the power company, possibly having to do with smart meters as an example. Often when the contract is unilateral, the corporation is hoping for a tacit agreement. If you don't say no, you have said yes, and this is what a lot of corporations are expecting.
There are two main types of contracts, unilateral and bilateral. A unilateral contract is usually imposed by acquiescence. For example, a phone company may require you to sign a contract that they have prepared without you and if you want their service, you have to follow their rules or terms. The contract does have to be within certain basic laws. An insurance policy is also considered a unilateral contract where the consumer receives the promised benefit only if they have paid their premiums.
A bilateral contract is where two parties are involved in the creation/rules of a contract. It contains a promise by each party to fulfill certain obligations to complete the deal. The buying/selling of a house is an example of this type of contract where the buyer must pay the sales price, and the seller must transfer ownership of the home to the buyer.
Other types of contracts are, quasi contracts, implied-in-fact contract, and express contracts.
The Meeting of the Minds & Negotiating of Terms
For contracts to be valid, they have to be negotiated, there has to be a "meeting of the minds". Both parties have to be in agreement and there also must be a full disclosure of relevant facts and terms. If anything is hidden or not disclosed, it is an invalid contract.
This is also where a counter-offer can be made. A "conditional acceptance" is a counter offer but it has conditions on it and the conditions have to be met or the contract does not move forward. Contracts exist under Private Law which means that their jurisdictions are restricted. You can't take them to court because they are private agreements, like buying a house. It is a private contract between you and another party.
Consideration is something of value or substance being exchanged between parties. For example, let's say the government decided that from now on, if you want to have a party or gathering at your house, you will have to pay for a license. What is the substance of value that the government is giving you? You already had the right to have a party in the first place so there is no value or substance to this contract and it would be invalid.
Acceptance and Performance
After both parties have accepted the terms of the agreement, the contract is now valid. Performance is the action of doing something based on the contract. An important point is that no one can be forced or coerced into a contract, this would be called physical duress and would void a contract. Another example of how a contract could be void is if one party entering into a contract is deemed adjudicated (incompetent or mentally insane). Additionally, if the considerations within the contract are illegal, this would be an illegality for void contract.
Another key factor in contracts is that no one is bound to an agreement. Only the liabilities that may result in the breech of the agreement are considered.