Did it ever happen to you when someone has promised you something but did not fulfill that promise? How does it feel? Have you experienced having an agreement with someone? What should you do in order for the other party to comply with your agreement? How can you make sure that your agreement has a legal binding effect?
In order for both parties to benefit from the agreement and ensure that no one will be prejudiced, a contract must be implemented and signed. Your contract must be valid and binding so that it will be enforceable in law. More about contract examples, templates, and discussions are presented below.
In order for a contract to be enforceable, it must contain these essential elements. While specific requirements may differ by state, the basic elements of a contract are as follows.
1. Offer: Every contract starts with an offer. An offer is a proposal by one party to another for a certain definite arrangement and terms. This offer must be communicated to the other party who has the right to accept, amend, or reject the other. When the offer is amended, this means that the original offer has been changed to a new counteroffer in which the original party who made the first offer will now be the one to accept or reject the counteroffer.
2. Acceptance: The acceptance of the offer can be in different forms: in writing, in person, or even over the phone. The requisite in an acceptance is simply to communicate the acceptance to the party offering the arrangement, clearly stating and declaring that he or she accepts and intends to be bound by the other party’s terms. While nowadays it is easy for people to communicate their acceptance over the phone or through email, years ago when snail mails are the primary communication method, the Mailbox Rule states that an offer is deemed accepted when the letter is placed in a mailbox, even if the offering party has never received it yet.
3. Consideration: This pertains to something of value that induces the other party to enter into the contract agreement. This does not only mean currency. It may also encompass property, services, the performance of an act, or a promise to refrain from an act. This means “to give,” “to do,” or “not to do.”
4. Competence: Also being referred to as legal capacity, competence is the ability of a party to enter into a contract. For example, for the contract to be valid, the parties entering into an agreement must be at least 18 years old. Minors cannot give consent to the contract; hence, when a contract is entered into by minors, the contract will not be perfected and is therefore not valid. Other reasons for incapacity are mental illness, incapacitated by disease or disability who does not understand the terms of a contract, and those who are under the influence of drugs or alcohol.
5. Mutual consent: There must be mutual consent from both parties for the contract to be valid and binding. However, when the consent was acquired due to duress or undue influence, this will not be considered as consent from the party, and instead, the contract will be rendered void.
6. Legality: For the contract to be valid and enforceable, the consideration of the contract must be legal. It must be according to the law, morals, customs, public order, or public policy. An illegal contract will immediately be considered void and cannot be rescinded or ratified. You may also see employment contract examples.
7. Writing: Although it is not a require for all contracts to be in writing, under the Statute of Frauds, certain contracts must be in writing for the contract to be enforceable. Examples of contract that must be in writing are as follows: donation of personal property greater than $5000, sale of land through an agent, the stipulation for the principal and interest in a contract of antichresis, stipulation to pay interest, and negotiable instrument.
For your contract to be enforceable in court and valid and binding, here are some guidelines that you can follow:
1. Make It in Writing: We all know that contracts can be oral, written, or partly oral and partly written. An oral contract is not entirely unenforceable, but as stated above, there are certain cases where the law required the contract to be in written forms. Hence, no matter what the nature of your contract is, it is better that you will make it in writing as written contract is less riskier than oral agreement since it clearly spells out the rights and obligations of both parties which can be helpful in case of confusion or disagreement.
2. Keep It Direct and Simple: Most people got overwhelmed by the contract’s legal terms, “whereby” and “heretofores.” However, contracts should not be as complicated as you think. In creating a contract, concise, short, and clear sentences are needed. You can use simple words in order for the parties of the contract to easily understand the contract and to prevent confusion and ambiguity. A numbered paragraph heading can also help in alerting the reader of the content of the paragraph.
3. Negotiate with the Right Person: If you are dealing with business matters, it is important that you are negotiating with the person in charge or vested with the authority to make a contract with another person. Do not settle for junior employees who has yet to confirm everything to the higher-ups. Instead, request to be in touch with someone who has the authority to bind the business under a contract. This pertains to company owners for small businesses or the chief executive officer for large businesses.You may also see advertising contract examples
4. Identify the Parties: In your contract, you have to make sure that you include the correct legal names of the parties of the contract. This is to make things clear regarding the responsibility in performing the obligations stated in the agreement. There are instances that a contract must state the organization or corporation and not the names of the person who signed the contract such as in a corporation or in a limited liability company.
5. Specify the Details: The rights and obligations of the parties of the contract must be spelled out in detail. It is important the every detail must be written in the contract as the law will only honor to what is written on the agreement and not on what you have discussed or amended verbally. If you wish to amend some details of the contract, you can create a short written amendment so it will become part of the contract.
6. Indicate the Payment Obligations: Money is often a contentious issue for a lot of people. Hence, it is important that you clearly indicate the payment obligations—who pays who, the due date of the payment, the method of payment, as well as the conditions for making the payment. For installment payment, you must list the dates when the payments must be made and the requirements. The method of payment can be cash, check, debit or credit cards, or any means agreed by the parties.
7. Define the Termination of Contract: Both parties must also agree on the circumstances that may terminate the contract. For example, they may stipulate that if the one party fails to pay at the date specified in the contract, the other party may have the right to terminate the contract because of the violation or breach of contract.
8. Decide How to Handle Disputes: Another important thing that must be included in the contract is the agreement of both parties on a way to resolve disputes. You must lay down what you or the other party will do in case something goes wrong. You may handle the dispute through arbitration, mediation, or going to the court. You may also opt not to resort to the latter as it can take up so much time and resources.
9. Select a Law Governing the Contract: There are certain cases when the contracting parties live in different states, and the rules in one state differs from or contradicts the other state. In this case, they must select or choose only one of those state laws to apply to the contract. Moreover, you must also specify where you will mediate, arbitrate, or handle disputes under the contract.
10. Maintain Confidentiality: In a contract where one hires the other to perform services to the other, there might be business information that one learns while doing or performing the contract. In this case, and all other cases related to this, there must be mutual promise that each party must keep the information confidential.
The following are the general and broad types of contract:
Why is a contract important?
Contracts are extremely important especially in handling disputes because they set out the important details of the agreement such as the names of the parties, considerations, deadlines, among others.
What are the different types of defective contracts?
There are four types of defective contracts: rescissible, voidable, unenforceable, and void.
How can defective contracts be made valid?
The remedies for rescissible, voidable, and unenforceable contracts are rescission, annulment, and ratification, respectively. Void contracts have no remedy because it is as if no contract has been made in the first place.