No matter the size of your company, a contract agreement is an essential part of conducting business. A legal contract is a document that all parties agree to. Contract agreements typically lay out the terms and conditions of an agreement, clearly explaining all parties' expectations. This often includes specific details about important aspects like payments, materials, and timelines as well as how the parties can resolve disagreements.
You will often hear the terms contract and agreement used interchangeably. However, it's important to note that contracts and agreements aren't exactly the same things. Agreements create mutual understandings between parties, while contracts are agreements that create enforceable obligations.
Verbal contracts are technically legal in most cases, though there are specific situations when they are not. Still, most businesses create written contracts today. Contracts include many details to try to cover all possibilities and eventualities as clearly as possible.
Most contract agreements never get to a courtroom. Theoretically, they could, therefore, be verbal. However, should something go wrong, a written contract better protects all parties involved. If a party to a valid and enforceable contract thinks the other party has in some way broken the contract (in other words, they've breached the contract), the harmed party can bring a lawsuit using the written contract for support.
While verbal contracts can still have the force of law, certain types of contract agreements are required to be in writing. This includes long-term contracts as well as contracts for marriage, or prenuptial agreements. ( Here is an article with further information about prenuptial agreements.)
It is also possible to have an implied contract. A party can enter into a contract unknowingly and still be forced to fulfill the contract's terms.
A contract must be clear and specific to be legally enforceable. It also must meet certain criteria. If a contract agreement is legally enforceable, it can be used in a court of law to support a decision if a dispute arises between the parties to the contract. However, if a contract does not include certain key components, it will not be legally enforceable and thus will not stand up in court.
If a contract is valid, litigation (the legal process) can determine if a contract has been breached or if there are circumstances negating the breach. However, a court will only consider a contract dispute if the contract itself is valid.
Essential elements for business contracts relate to both the agreement itself and to the parties entering the agreement. However, it is not illegal for someone to enter into a contract that does not include all of the essential components. A court simply cannot enforce a contract that doesn't include the necessary elements.
Components needed to create a valid contract include:
All valid contracts must have a specific offer. An enforceable contract must also include acceptance of the specific offer.
Further, both parties to the agreement need to consent to their free will. That means neither party can be forced or coerced into signing a contract. Both parties to the contract must also clearly agree to the same terms.
The conditions of the offer, acceptance, and mutual consent also imply that the parties intend to create a binding agreement. That means if one of the parties (or both of them) aren't serious, there isn't actually a contract.
All contracts must include consideration, or something of value being exchanged between the contract's parties, to be valid. That thing of value can be either services or money. However, both parties must be giving something. If not, you have a gift, not a contract.
Here is an article about consideration in contracts.
Parties to an agreement must all be of sound mind for a contract agreement to be legally enforceable. In other words, the agreeing parties must be able to understand the situation and what is being required of them. Competence also requires that:
If a party to a contract is not competent, that means the contract is not considered valid. The party that is not competent can ignore, or disavow, the contract in that case.
For a contract to be enforceable, it must be a contract for a legal purpose. In other words, a contract for something illegal, such as prostitution or selling drugs, is not enforceable in a court of law.
While the above components are required to make a valid contract, there are other important aspects that anyone creating a contract should be aware of. Things to keep in mind include:
Contracts should incorporate local regulations that could apply to the specific situation of the agreement. Industry and/or union regulations may also apply and should be included in the contract. Examples to consider include:
Good contracts don't leave anything to chance. You'll want your contract to include all details relevant to the agreement you're entering into. Even if something seems obvious to you, it may not be clear to the other party, so make sure your contract defines any key terms as well as exact services or products.
Important details to cover include:
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Various categories of contracts exist. Examples include:
These contracts are usually one-sided. One party makes all promises in this type of agreement. Item repairs and maintenance agreements are examples of this type of contract.
Both parties make promises in this type of contract. Bilateral agreements can give parties access to new markets. Real estate contracts are typically bilateral contracts.
An executed contract is simply a completed contract, typically made between two or more individuals. Executed contracts are also possible between a person and entity, or two or more entities. The purchase of a service or product is an example of an executed contract. The terms of an executed contract must be fulfilled right away.
Executory contracts, on the other hand, are contracts with terms that will be fulfilled later on.
Some agreements require the use of a seal to show the contract is official. This seal can be a wax seal, a seal created using a special stamp to emboss the seal onto the document, or the attachment of adhesive paper.
Working with an experienced contract lawyer can help you make sure your contract includes all the necessary components to protect you and your business given the specific circumstances of your agreement. This way, you'll know that your contract is valid and will stand up in a courtroom if a dispute arises.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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Atilla Z. Baksay is a Colorado-based attorney practicing corporate and securities attorney. Atilla represents clients in the negotiation and drafting of transactional (e.g. master service, purchase and sale, license, IP, and SaaS agreements) and corporate (e.g. restricted stock transfers, stock options plans, convertible notes/SAFE/SAFT agreements, bylaws/operating agreements, loan agreements, personal guarantees, and security agreements) contracts, in-house documents (e.g. employment policies, separation agreements, employment/independent contractor/consultant agreements, NDAs, brokerage relationship policies, and office policy memoranda), and digital policies (e.g. terms of service, privacy policies, CCPA notices, and GDPR notices). Atilla also reviews, and issues legal opinions concerning, the security status of digital currencies and assets. Following law school, Atilla practiced international trade law at the Executive Office of the President, Office of the United States Trade Representative, where his practice spanned economic sanctions enacted against goods originating in the People’s Republic of China valued at $500 billion. Afterwards, Atilla joined a Colorado law firm practicing civil litigation, where the majority of his practice comprised of construction defect suits. Today, Atilla's practice spans all corporate matters for clients in Colorado and the District of Columbia.
I love contracts - and especially technology-related contracts written in PLAIN ENGLISH! I've worked extensively with intellectual property contracts, and specifically with IT contracts (SaaS, Master Subscriptions Agreements, Terms of Service, Privacy Policies, License Agreements, etc.), and I have built my own technology solutions that help to quickly and thoroughly draft, review and customize complex contracts.
I am a software developer turned lawyer with 7+ years of experience drafting, reviewing, and negotiating SaaS agreements, as well as other technology agreements. I am a partner at Freeman Lovell PLLC, where I lead commercial contracts practice group. I work with startups, growing companies, and the Fortune 500 to make sure your legal go-to-market strategy works for you.
After graduating from The University of Chicago Law School in 2002, Clara spent eight years in private practice representing clients in complex commercial real estate, merger and acquisition, branding, and other transactional matters. Clara then worked as in-house counsel to a large financial services company, handling intellectual property, vendor contracts, technology, privacy, cybersecurity, licensing, marketing, and otherwise supporting general operations. She opened her own practice in September of 2017 and represents hedge funds, financial services companies, and technology companies in a range of transactional matters.
Founder and owner of Grant Phillips Law.. Practicing and licensed in NY, NJ & Fl with focus on small businesses across the country that are stuck in predatory commercial loans. The firm specializes in representing business owners with Merchant Cash Advances or Factoring Arrangments they can no longer afford. The firms clients include restaurants, truckers, contractors, for profit schools, doctors and corner supermarkets to name a few. GRANT PHILLIPS LAW, PLLC. is at the cutting edge of bringing affordable and expert legal representation on behalf of Merchants stuck with predatory loans or other financial instruments that drain the companies revenues. Grant Phillips Law will defend small businesses with Merchant Cash Advances they can no longer afford. Whether you have been sued, a UCC lien filed against your receivables or your bank account is levied or frozen, we have your back. See more at www.grantphillipslaw.com
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My ex-husband and I discussed getting my son a cell phone, but he was very much against it. We came to an agreement that we would not get him one until the end of the school year, but my current husband bought him one. I am wondering if the email that was written is legally binding. I would like my son to still be able to use the phone, even though my exhusband is still against it, but wanted to make sure the agreement that was made wasn't legally binding.
Early in law school we learned that any bargain for consideration can be legally binding, meaning anything even written on a cocktail napkin can be binding if it contains the elements necessary to deem it a contract. Although I am answering this as a hypothetical and not as your attorney it is very possible for an agreement to be deemed legally binding when done via email if it can meet the threshold of being a contract. The basic elements for a contract or legally binding agreement are offer and acceptance, adequate consideration, capacity and legality of the contract. If an email contains all those elements it can be an agreement that was made through the course of the communication. I would certainly recommend speaking with your divorce attorney or a family law attorney licensed in your state if you are concerned about any possible liability. *The answer above does not constitute legal advice, nor create an attorney-client relationship.*
Asked on Jul 29, 2021Has a contract with someone where if we disagreed we would go to mediation. They refused to go, they offered us a settlement as long as we signed another contract. I don't understand fully what it is saying.
Absolutely NOT. You never sign ANYTHING you do not understand because when you sign, you become bound to those terms whether you understood them or not or whether you agree with them or not. Should you later have a disagreement on the contract you signed, the court, or arbitrator will see your signature on the document as a sign that you read, understood and agreed to the terms. You will need to hire an attorney to review the initial agreement to see if they can refuse mediation as well as to look at the new contract and let you know what it says and whether you should sign it or not. I am a contracts attorney and if you you would like my services, you can contact me on the contracts counsel website.
Asked on Sep 19, 2021I need help to prepare a personal contract between myself and Ex-partner. We were never married before. I want to offer her compensations for her losses due to the end of our relationship and need help to write the terms and conditions and discuss legal issues.
OK. You need to decide what you would like the terms to be and discuss them with her. A contract is always best and easier to get done when both parties are in agreement with the terms and what the document should say. Once you have done that, then you should seek to engage with an attorney to assist you with the actual document and the language. If you you would to engage my services where I would draft your agreement and advise you, you can contact me on the contracts counsel website and I would be happy to assist.
Asked on Jul 29, 2021Has a contract with someone where if we disagreed we would go to mediation. They refused to go, they offered us a settlement as long as we signed another contract. I don't understand fully what it is saying.
You should never sign a contract or other legal documents if you do not understand them. Get help and advice from a qualified lawyer before entering into contractual and legal obligations.
Asked on Feb 1, 2022To avoid foreclosure, I spoke with a contractor to flip my house for me. He would pay my mortgage until it sold then pay it off and keep the profit. I walk away with the mortgage company paid, but I was fouled. He isn't paying the mortgage after I signed the contract. I'm concerned he will be able to sell it now himself without the mortgage company ever being paid.
There are many issues involved in this question. I would need to see the original deed and mortgage on your house plus the contract you signed with the contractor. The original mortgage almost certainly had an acceleration clause stating that if you sold the property, then the full mortgage becomes due. Going after the contractor might be possible but other avenues would more likely be the better route to keep your house from being foreclosed. Will also need to see if your contract gives ownership to the contractor or just the right to sell on your behalf. Lots of additional questions that need documents to give you your options.
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