Real Estate Council of Alberta Fundamentals Practice Exam

Which of the following is NOT an essential element of a contract?

1. Genuine consent

2. Financial gain

3. Capacity of both parties

4. Mutual agreement

The correct answer is: Financial gain

In the context of contract law, essential elements are fundamental components that must be present for a contract to be valid and enforceable. Genuine consent, capacity of both parties, and mutual agreement are all critical elements. Genuine consent refers to the agreement of both parties to enter into the contract, free from coercion, undue influence, misrepresentation, or mistake. This ensures that all parties are willingly participating and understand the terms of the agreement. The capacity of both parties means that they possess the legal ability to enter into a contract. This typically involves being of sound mind, of legal age, and not being under duress or otherwise incapacitated. Mutual agreement, also known as the meeting of the minds, indicates that both parties have a clear understanding and mutual acceptance of the contract’s terms. This is crucial for ensuring that there is no misunderstanding or ambiguity regarding the obligations and expectations of the parties involved. Financial gain, while often a motive or outcome for many contracts, is not a necessary component for a contract to be valid. A contract may still be enforceable even when it does not result in financial gain for one or both parties. Therefore, in this scenario, financial gain does not qualify as an essential element, making it the correct response.