A contract is a legally enforceable written or verbal agreement between two parties. Contracts are a fundamental part of any business, regardless of its size or nature. A small enterprise will require assistance in drafting a contract or settling a dispute as much as a big company. At Graham Legal, P.A., our attorneys are skilled and experienced in all aspects of contracts.
Verbal vs. Written Contracts
Contracts may be verbal (oral), written, or a combination of both. A verbal contract is more difficult to prove the existence of, leaving the terms of the agreement undefined. An oral agreement forces the terms of the agreement to be committed to memory, opening the contract up to error and disagreements. It is in best practice for contracts to be put into writing, providing both parties with certainty in the outlined terms.
Purpose of Contracts
These legally binding agreements are a promise or set of promises between two or more parties. The documents will outline responsibilities and expectations for the persons taking part in the agreement. Furthermore, varying situations will be addressed including exceptions and the process for which disagreements will be resolved.
Elements of a Contract
A legally enforceable contract contains the following essential elements.
An offer is the formal communication of the intent of one party to enter the agreement with another party. A willingness to take part in the agreement and an understanding of the terms create a binding accord in which both parties must perform certain tasks and acknowledge specified responsibilities. Offers may be presented via email, letter or any form of expressed communication which includes the initiating parties’ willingness to enter into an agreement.
Consent given by the offer recipient to enter into the terms stated by the contract is referred to as the acceptance. This action may only be taken by the intended recipient unless authorization is provided to another individual on their behalf. Specifications for acceptance of the offer must be followed accordingly.
Additionally, a counteroffer may be made by the recipient where the original offer is rejected and the proposition of another one is made to the originator.
Consideration is a vital aspect of an enforceable contract and, it’s the major incentive for both parties to enter into the agreement. Comprised of either money or a promise, the consideration must be clearly defined and agreed upon by both parties.
Mutuality of Obligation
Similar to consideration, mutuality of obligation states that both parties are bound to performing their obligations or the agreement will be considered void.
The contract should not be drafted in such a way that the terms are considered unfair or one-sided. Examples include:
- Allowing a single party to avoid or limit their obligations
- Allowing a single party to terminate the contract
- Penalizing a single party for breaching or terminating the contract
- Allowing a single party to vary the terms of the contract
A contract written in such a manner will be invalidated by a court since the party provided with absolute power to expunge the contract will experience no legal liability.
The competency of an individual to enter into a contract requires that the person’s mental capacity allows them to understand the nature and consequences of taking part in an agreement. That is, the person cannot be insane, or be impaired by drugs or alcohol.
Lawful Subject Matter
A contract may only be enforceable if the subject matter is not prohibited by law or in violation of public policy. Examples of unlawful subject matter in a contract include: the sale of illegal drugs, the promise to transfer a clear title to real estate of property that is encumbered by a mortgage or lien, or any other action prohibited by law or public policy.
Breaching of Contract
A breach of contract occurs upon one party’s failure to perform in accordance with the terms outlined in the contract. In the case of minors, although the courts consider them to be inexperienced in their ability to negotiate fair terms, they can enter into a contract and have the power to disavow it without any liability.
Enforcing a Contract
In the event that a contract is breached, one or both of the parties may wish to enforce the conditions of the contract. The next step should be an attempt to resolve the conflict independently between both parties. If that proves unsuccessful, a contract dispute attorney may be hired in an effort to resolve the situation outside of court. A lawsuit may be filed if previous attempts at resolution are fruitless.
The attorneys at Graham Legal, P.A., have the necessary tools to aid in drafting, reviewing, enforcing, or remedy of disputes. Contact us today for legal assistance with contracts.