Agreement Validity Term: Everything You Need to Know
Agreement validity terms reveal the intentions of two parties entering into a contract. 4 min read
Agreement Validity Terms
Agreement validity terms reveal the intentions of two parties entering into a contract. The terms can be formalized in writing or, in the case of an oral agreement, be determined by a court. Without them, a contract cannot exist.
They can be language that is unique to the conditions that have determined the need for the agreement or standard clauses that are commonly used in contract law. Regardless, both parties to the contract must have confidence that the terms imposed by the contract are legally valid and protect their rights and provide guarantees of security should disagreements arise over the duration of the contract.
Not All Contract Terms Are Valid
When courts look to establish the validity of terms in a contract, the overriding assumption of contract law is that all agreements made between two parties are legally binding. This traditional assumption on the part of the courts gives parties a guarantee that any promises or agreement made between them will have standing should one of the parties pursue damages for a breach of the contract.
There are, however, three instances where the courts have determined that a contract may not hold parties liable to the terms that the contract contains.
This invalidity can exist when:
- The terms are overly broad and unspecific. They are judged to be only matters of opinion or an exaggerated statement of fact held by one party. The misrepresentation may be deemed to be ambiguous language or contain a “mere puff” of validity.
- A court determines that the agreement contains an “honor clause,” and was not intended to be contractually valid.
- A contract contains language such as “subject to a contract being negotiated,” or “subject to further negotiation with the intention of forming a contract,” that indicates one or both parties intend to continue negotiations and an offer has not been accepted. Another term for this condition is “without prejudice.”
Not All Valid Terms are in Writing
It’s a common misconception that in order for a transaction to be contractually valid, it must exist in written form. This is not the case. In fact, most transactions for which a party can seek damages as a result of a breach of contract are oral agreements.
For instance, practically every purchase that a customer makes can be seen as an oral contract between the contractor and the vendor. For instance, if you go to an establishment that sells hamburgers and make a purchase, you probably have an expectation that the meat is indeed hamburger meat and it has been handled according to existing food safety laws. You do not sign a contract with every purchase. The exchange of money is enough to create a valid transaction. If, however, you become ill after eating the hamburger and it is determined that food was not prepared according to existing laws, you have the right to sue the hamburger establishment for breach of contract.
However, there are other agreements where the contract must be in writing to be considered valid so that a court can determine the intentions of the party at the time the transaction occurred and not have the matter exist in a “he said/she said” situation. An example might be the sale of a car between the car’s owner and another party. After the sale is completed, if the purchaser claims that the car’s owner had promised to repair the brakes but does not have that promise in writing, it is unlikely the court will find in the purchaser’s favor because such as a promise is not commonly a condition of a sale.
Making Agreement Terms Valid
Because valid agreement terms are such an important factor in determining the legal binding of a contract, for many transactions, states have stipulated by statute when a contract must be in writing. For instance, most states require a written contract for real estate transactions that cover more than one year in duration.
If you have any questions as to whether an agreement you are considering entering into with another party requires a written contract or whether an oral agreement is still enforceable in a court of law consult an attorney. It is better to have an agreement in writing just to avoid misunderstandings as to the intent and responsibilities of the agreement.
One thing to consider regarding the decision of whether to conduct business through an oral agreement as opposed to a written contract is the statute of limitations for seeking damages. In most cases, damaged parties have longer periods over which to seek remedies with a written contract.
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