Leasing License Practice Exam

In contract law, which of the following is a requirement for a valid contract?

1. Only one party must be competent

2. The parties must engage in a legal purpose

3. It should be verbal rather than written

4. Only one party needs to receive something of value

The correct answer is: The parties must engage in a legal purpose

For a valid contract, one key requirement is that the parties involved must engage in a legal purpose. This means that the contract must be for something that is lawful and not against public policy or statutes. If the purpose of the contract involves illegal activities or terms, the contract cannot be enforced by law, making it void. The legality of the contract's purpose is fundamental because it ensures that the contract adheres to the legal standards set by society. Contracts related to illegal activities, such as drug trafficking or agreements to commit fraud, lack the validity needed for enforceable contracts. Therefore, the requirement for a legal purpose stands out as essential in the formation of any contract. Other choices do not meet the necessary criteria for contract validity. Only one party being competent does not satisfy the requirement, as both parties must be competent to enter into a contract. Verbal contracts can be valid, but certain agreements must be in writing to be enforceable, so the emphasis on verbal rather than written is misleading. Lastly, contracts typically require that both parties provide consideration, or something of value, so the statement that only one party needs to receive value does not align with fundamental contract principles where mutual consideration is required.