The four basic elements necessary for formation of a valid contract are capacity, offer and acceptance, consideration and compliance with law and public policy. Also, implicit in every contract is a duty to act in good faith and deal fairly with the other party. In fact, a valid contract is made up of several elements and, if any of the required elements are missed, the contract could be considered invalid and incapable of being enforced. A contract is an exchange of an act or promise between two or more individuals or business entities. Every real estate transaction, residential, commercial, or otherwise requires a contract, even if it's verbal.However, a valid contract must always have certain elements, or it could be voided by a court of law. Let's take a look at those required elements.