A well-written contract is your first
line of defense against future problems. Part of being well-written
means that your contract is legally valid and enforceable. This may
sound like something that requires a great deal of legal jargon, but,
in reality, it requires only seven basic and understandable elements.
What are these seven features? And how
do they relate to your contract writing? Here is a short guide.
The offer is laid out by the party
creating the contract. This outlines what you or the other party
propose to do. This portion of any contract should be specific enough
to identify and quantify exactly what both parties need to do to
fulfill the contract. What constitutes work completed or satisfactory
delivery? What is the time limit for delivery or execution? Spell out
the details here.
The other party must then accept any
offer. Detail within the wording of the contract how the other party
can accept the offer. This could be a verbal acceptance - over the
phone or in person - or a written acceptance through various
communications methods. Be sure to include a deadline to accept the
offer, or you could wind up with an unexpected wait.
Consideration is a legal term for what
the other party gets in return for agreement to the contract. Most of
the time, this is financial consideration (i.e. money), but this
could also be transfer of an asset, access to something special, or
even intangibles like introductions to potential investors.
The primary requirement for
consideration is that it is sufficient in value to both parties.
Contracts that offer nothing in return are often very suspect.
The concept of mutuality takes
agreement one step further. This is the point - often referred to as
a meeting of the minds - at which both parties are in actual
agreement about the contract.
This requirement helps demonstrate that
both sides understand the contract's rights and responsibilities, and
both agree to its basic terms without being under duress or
misrepresenting what they will do within the contract.
Of course, not everyone can legally
enter into a contract. Minors under the age of 18, for example,
generally cannot enter into a binding agreement. Both parties must
not be under the influence of drugs or alcohol, and they must be
mentally fit to enter into agreements. If any of these is in doubt,
consult with an experienced business attorney before moving forward
with the contract.
The contract also cannot contain
legally questionable elements. For instance, you cannot contract with
another business to defraud the government, cheat on taxes, or bribe
officials. Most business owners would never intentionally enter into
illegal contracts, but it could be less obvious than you think.
Contracting with a vendor for a suspiciously low price might be
invalid if the vendor employs illegal methods.
The final element - being in written
form - is not necessary for all contracts. In most states, long-term
(more than a year) or high-dollar contracts generally need to be in
writing. Oral agreements are good for a variety of other situations,
such as buying or selling a smaller asset. But a written contract is
always a good idea to ensure a smooth relationship and satisfactory
outcomes.
Do you plan to write a new contract and
need to figure out how to include all these key elements? At Hoffman
& Hoffman, our experienced legal professionals can help with
everything from writing the agreement to resolving disputes about it.
Call today to learn more about our business services and ask any
questions you may have.
