Contracts are an essential element of almost any business. They allow the business to make agreements that are legally enforceable so they can plan out their actions with confidence that the obligations of the other party will be met. A good business contract will have a variety of essential elements that will help ensure that both parties understand the contract and that it is legally enforceable in court should there be a serious dispute. Of course, a strong business contract will also dramatically reduce the risk of the occurrence of a serious dispute. The following are key elements of a strong business contract.
Offer
The offer portion of the contract identifies what one party is willing to do or give to the other party. In most cases, this will be a situation where one party offers to perform a set service, provide a set product, or even agree to not take a specific action. The offer must be legal in nature or the contract will be invalid right from the beginning.
Consideration
The consideration is what the other party is offering in return; in legal terms, it is called the “bargained-for exchange.” The most common example would be if one party offers to perform specific work, the other party will offer to pay it a set amount. Of course, contracts can be significantly more complex than this, but when broken down to just the basic parts, it is just an agreement between two (or more) parties to exchange things that one party wants from the other party. Without consideration, there can be no contract.
Details
While not required, all contracts should be written in such a way as to be as precise and detailed as possible. For example, if the contract is to have one party complete some type of work, it should include a description of the work, what materials should be used, who will cover the costs of the materials, and the date by which the project will be completed. This is just one example but there may be many other details that should be included as well based on the specific needs of each party signing the contract. If you want to pursue a lawsuit based upon a breach of the agreement, it should be clear exactly what each party was supposed to do.
Competency
In order for a contract to be valid and enforceable, there cannot be any reason to doubt the competency of either party. Reasons why a person might not be competent include being intoxicated, a minor (under the age of consent), or lacking the mental capacity to understand the terms of the contract. If one party to the contract is incompetent, the contract could be invalid.
Acceptance
Finally, the contract must be agreed to by all parties involved. In most cases, this will mean that each party needs to sign the contract indicating that they agree to all the rights and responsibilities outlined in the contract itself. However, acceptance can also occur if someone does something required by the contract in response to an offer. For example, if someone offers you money to make them a cup of coffee, and you respond by making them a cup of coffee, you may have been found to have accepted the contract.
Writing a Strong Contract
The best way to ensure that you have a strong contract is to have an experienced business attorney write it up, or at least review it, on your behalf. This will help ensure that all of the legal aspects of the deal are properly considered so that it will stand up in court. If you need to have a contract written or reviewed, please contact us to schedule a consultation and see how we can help you.
Carla D. Aikens, P.L.C.
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