Key Takeaways:

  • A person to person contract is a legally binding agreement between two individuals that outlines terms, responsibilities, and expectations.
  • Every contract must contain essential elements like offer and acceptance, consideration, mutual assent, and legally capable parties.
  • It is advisable to include detailed descriptions of goods or services, payment terms, contract duration, and any penalties for breach.
  • Verbal contracts may be enforceable, but written contracts offer better legal protection and clarity.
  • Contracts may also include confidentiality clauses, dispute resolution terms, and termination conditions for added protection.
  • Relationship contracts, though not always legally binding, help set expectations between partners.
  • Seeking legal advice when drafting a contract ensures compliance with local laws and protects both parties' interests.

A contract between two people is one of the most common types of contracts. A contract is a type of agreement made between two or more people that is also enforceable by law.

Information Commonly Found in a Business Contract

A business contract can be between many different parties. In some cases, it might be between two parties creating a professional relationship. In other cases, it might include more than two parties. Regardless of the business structure, it is important to have a contract that is detailed and covers all aspects of the agreement.

Some business professionals choose to utilize a contract template. If you use a template, however, you might have to edit it to fit your needs. With or without a template, a contract should carefully describe all of the details of the agreement.

Important Parts of a Contract

There are a few details that should be present in every contract. Each contract should include the following:

Essential Elements

Essential elements are what make the contract legal. These required elements include:

  • Consideration: Something of value must be exchanged between each party.
  • Offer and acceptance: Both parties must agree to the offer and accept the contract terms.
  • Mutual assent: Both parties must have a mutual agreement.
  • Capable parties: Both parties must be of legal age and competent to agree to the terms of the contract. If a minor is involved, the parents must agree to the contract.

Verbal vs. Written Contracts

While verbal contracts can sometimes be legally binding, they present proof and enforcement challenges. A written contract is always preferable because it clearly outlines the terms and expectations of both parties. Certain contracts, such as real estate agreements or long-term service contracts, must be in writing to be legally enforceable.

A written contract offers:

  • Clarity in terms and conditions
  • Legal protection in case of disputes
  • Easier enforcement through courts
  • A reference point to avoid misunderstandings

Conversely, verbal contracts rely on memory and trust, making them harder to prove in legal disputes. If you must use a verbal agreement, ensure you have supporting evidence, such as emails or witness testimony.

Goods and Services

It is important to include detailed information about the goods or services exchanged in the contract. It is always a good idea to be thorough and detailed about the services to be offered and what will be expected from each party.

Start and End Dates

Always include a specific start and end date of terms included in the contract. This ensures that both parties are aware of expectations. Open-ended contracts without a specific end date can complicate things and result in a costly disagreement.

Payment

A contract should also include information about payment. In addition to the payment amount, it should also clearly list the expected payment date and what actions will be taken if payment is not submitted. If the contract also includes goods or services, the payment portion should also include information about the non-delivery of goods.

Additional things like deposits, discounts, and reimbursement procedures should also be included in the contract.

Dispute Resolution and Breach of Contract

A contract should specify what happens in case of a breach or disagreement between the parties. This section should outline:

  • Methods of dispute resolution (e.g., mediation, arbitration, litigation)
  • Penalties for contract breaches, such as financial compensation or contract termination
  • Remedies available to the non-breaching party

Including a dispute resolution clause can prevent costly lawsuits and encourage amicable settlements.

Term

A specified term should be included in the contract. If the contract template does not include one, one of the parties may write one within the contract and have the other party sign it, if they agree. Terms can be detailed by time (days, months, years) or by the completion of performance goals.

Signing

A legal contract must be signed by both parties. It is also a good idea to have each party date the contract. If possible, also include your current address. In some cases, it might also make sense to have a witness sign the contract, too.

Additional Components of a Contract

Depending on the type of agreement, there could also be additional required components of the contract. Other things you might consider including:

  • Intellectual property agreements.
  • Any present conflict of interest.
  • Representative information.

Each party should retain a copy of the contract. If any disagreements occur, then they can refer back to the original signed document.

Confidentiality and Non-Disclosure Agreements

Some contracts, particularly in business dealings, require confidentiality clauses to protect sensitive information. A confidentiality or non-disclosure agreement (NDA) ensures that neither party discloses business secrets, financial information, or proprietary knowledge.

Key elements of a confidentiality clause include:

  • Definition of confidential information
  • Obligations of each party
  • Duration of confidentiality
  • Exemptions (e.g., publicly available information)
  • Penalties for breaches

This is especially useful when sharing trade secrets, client lists, or sensitive business data.

Relationship Contracts

A contract between two people in an intimate relationship is generally referred to as a relationship contract. It is most often found in partnered/married relationships. However, a relationship contract usually isn't legally binding.

The contract includes information about the logistics of the relationship and the expectations that each partner brings to it. This emotional process can bring up a lot of questions between the two parties. It can make each party question the need for a relationship contract in the first place. Some people may choose to create a relationship contract to create a sense of security, while others may choose to create one to discover new things about the relationship.

Termination and Renewal Terms

A contract should explicitly state how and when it can be terminated or renewed. Common termination conditions include:

  • Completion of the contract’s purpose
  • A specific end date
  • Mutual agreement to terminate early
  • Violation of contract terms by one party

For renewable contracts, define:

  • The renewal process (automatic or manual)
  • Any notice period required for non-renewal
  • Changes in terms upon renewal

A well-defined termination clause prevents legal uncertainties and ensures both parties are prepared for the contract's end.

FAQs

1. What makes a person to person contract legally binding?

A contract is legally binding if it includes offer and acceptance, consideration, mutual agreement, and legally capable parties. Written contracts provide stronger legal standing than verbal agreements.

2. Can a verbal agreement hold up in court?

Yes, but proving the terms of a verbal contract is challenging. Written contracts are preferred because they clearly document the agreement.

3. What happens if someone breaches the contract?

The contract should outline the consequences of a breach, including financial penalties, contract termination, or legal action.

4. Do I need a lawyer to draft a person to person contract?

While not always necessary, a lawyer ensures that the contract is legally enforceable and protects your interests.

5. Can a contract be terminated early?

Yes. Common termination clauses include mutual agreement, failure to meet obligations, or breach of contract.

It is important to include all of the required components of the contract to make it a legal agreement. If you need help with a contract between two people, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.