Contract Issue: Everything You Need to Know
Contract issues like understanding the terms of contracts and how they work are vital for those who are planning to make agreements with other parties.3 min read
Contract issue is an important topic for anyone who is planning to make agreements and deals with other businesses or individuals. You simply cannot rely on a verbal agreement and expect a contract to be fully enforced. Understanding the terms of contracts and how they work could save you thousands of dollars and a lot of headaches down the road.
Legal Contract Issues
One of the primary issues in a contract is whether or not one or both parties are willing to keep their word in a legal contract. When making a transaction with one person, the parties that are contracting have to be of legal age according to state law. This is generally age 18 in most states. The parties have to also be of sound mind and be free of a legal disability, such as a conservatorship ordered by the courts.
Any transactions that involve any legal entities, like an LLC or a corporation, the person who is the representative of that entity has to have legal authority to get into contract on its behalf.
If the individual entering the contract does not have adequate authority or competency to enter into a contract, the contract will not be enforced in court.
Contracts are typically made in written form, orally, or in some form of communication between all people involved. State law will require that some contracts must be in writing and signed to be enforced.
The Statute of Frauds requires written contracts in some situations. With regard to small businesses, written contracts are required for:
· Any transactions over $500
· Leases of property of more than one year
· Sales of real estate
· Contracts that are not performed within a year of their establishment, such as employment contracts
While a contract made within a small business does not have to be written to be enforceable, the written form of contract is much more easily enforced if a problem should occur regarding the contract terms.
The issue with oral contracts is being able to prove the terms that were originally agreed to. Should the parties to the contract have different ideas as to what those terms were, the contract could end up in court with you shouldering court costs and attorney’s fees.
Having a written contract allows you to easily refer back to the terms in the event of a dispute so that it can be worked out without going to court.
How to Issue a Business Contract
A contract is simply defined as a form of agreement made between at least two parties that will bind everyone to the agreement that is made. For a contract to occur between at least two businesses, it will require:
· An offer
· The acceptance
· The exchange of consideration
The offer provides the other party with the opportunity to accept the proposed offer. The terms need to be absolute and finalized. You will need to have a reasonable expectation that you are going to go into the contract based on your offered terms for it to be valid.
For instance, if you want to sell your business to another individual for $5, this would not be considered a reasonable, valid offer. Likewise, if you want to sell 100 pounds of steak to a restaurant for market price, this offer would be considered valid as it is reasonable that you would deliver on this offer.
You need to wait for the party to accept your offer. It will need a reasonable amount of time to accept. The accepting of the offer means there is no doubt that the offer is accepted. It has to be absolute.
If you are selling the steak to the restaurant, the owner has to promise to buy. He cannot just say that he might buy it. It has to be definite.
A contract can only be enforced in court if there is consideration that is supportive of the offer. Consideration refers to something valuable that is exchanged among the parties in the contract.
For instance, if the restaurant has accepted the steak offer, both parties will then have to exchange consideration. Your consideration is 100 pounds of steak. The restaurant’s consideration is the market price for the steak.
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