The formation of contracts involves several key elements that must be present for an agreement to be legally binding. These elements include an offer, acceptance, consideration, and the intention to create legal relations. An offer is a proposal made by one party, while acceptance is the agreement of the other party to the terms. Consideration refers to something of value exchanged between the parties. Additionally, both parties must have the capacity to contract, meaning they are of legal age and sound mind. The contract must also be for a lawful purpose. If these conditions are met, a valid contract is formed, enforceable by law.