Getting Smart with Your Business Contract
Contracts are highly complex documents. If they are drafted properly, they are legally binding and can have far-reaching ramifications for your business. It is always to your advantage to get deals in writing, however, you should hire the services of a business contract lawyer instead of drafting your own because one innocent miswording could cost your company thousands.
What is a Contract in Legal Terms?
A contract is an agreement, written or oral, that is between two or more parties. It is enforced by the legal system. These contracts should be made in writing to be upheld by the courts, but there are instances where oral contracts are suitable. All contracts must be made freely between the parties agreeing in them—and no one can be under duress. If one party fails to fulfill the terms that are established in the contract, then they are guilty of a breach of contract and can be held liable for any damages.
What Makes a Contract Legally Binding?
Not all agreements can be enforced by the courts. Instead, certain elements must be present in order to create a legally binding contract. These elements include, but are not limited to:
1. Mutual Understanding – This requires that both parties involved know what the contract covers; therefore, they know what is required for each party. For example, both parties must know that they are creating a contract for a service and the exact specifications of that service. If either party is confused as to which service they are performing, then the contract may not be enforceable by the courts.
2. Offer and Acceptance – One party is making an offer in the contract or communicating a clear intent that is bound by the contract. Then, the other party must accept that offer and the terms of that offer in order for the contract to be valid.
3. Consideration – There must be an exchange of something that is considered valuable. There are instances when a contract may be one-sided and enforceable, but these are very rare.
4. Capacity – In order for the contract to be valid, each party must have the mental capacity to sign and enter into a legally binding contract. If one is not of sound mind or they are legally under age, the contract will not be enforceable because the individual did not have the authority to sign into a contractual agreement. Also, the individual making and signing the contract must be an agent of the party—if they are signing for someone else.
5. Purpose – The contract must be created with a legal purpose in mind; therefore, if a contract is made to sell something illegal or commit illegal activities, it is not enforceable in the court.
Reasons a Contract May Not be Enforceable
There are instances where contracts cannot be enforced. Even if the key elements are still satisfied. These situations can include, but are not limited to:
Duress – One of the parties can prove that they were forced into signing the agreement.
Violation of Policy – If the contract violates federal or state laws, then it will not be enforced by the courts.
Impossibility – Sometimes a contract has something that is impossible to uphold or too expensive. For example, a natural disaster ruins the ability to complete the contract.
Nondisclosure – If one parties misrepresents themselves or a deal in the contract, and then the contract will be considered void.
Have Enforceable Contracts – Hire a Business Attorney
If your business needs contracts, you should never draft them yourself. Instead, enlist the help of a business attorney so that you can ensure all of your contracts are not only enforceable, but protect your business. Contact the Campbell Law Group today at 305.460.0145 to get started.
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