A contract not signed by one party makes it an agreement that isn't legally binding. Valid contracts need to have all required elements in it, and they are enforceable under federal and state laws. The two parts of a contract are the offer and acceptance. One party will make an offer and state what they're providing, while the other party will choose to accept the contract's terms, most often in writing. It can take time for acceptance to take place, as the negotiation process takes time until an agreement is reached.

The Basic Elements of a Valid Contract: Consideration

The subject that's in the agreement needs to be legal, and both parties need to agree to the following:

  • Be over the age of consent (usually 18 years old)
  • Agree to the terms freely
  • Mentally be able to carry out the agreement

A contract that's valid needs to have an element of consideration, such as a value or price, that is exchanged. Consideration can include interest, right, or benefit and isn't limited to money. Both parties need to somehow benefit from the contract. As an example, when a party sells their car to another person, the buyer gets the vehicle and the seller gets the money.

Consideration is when one of the parties gives something to the other party in exchange for something, no matter if it's big or small. This is what the promisor asks for and gets in exchange for the price of the promise. The promisor is the person who makes the promise, while the promisee is the person the promise is made to. Consideration is something the promisor wouldn't otherwise get. However, it's not necessary to use the term consideration in an agreement. This should be thought of in terms of legal value compared to economic value.

Verbal agreements can be enforced, but they aren't normally valid until they're in writing. Those that have large amounts of debts or consideration, contracts that won't go into effect for a while, or real property should be written out.

What Is the Difference Between Void and Voidable Contracts?

A contract isn't valid when it's void, which means it can't be enforced under federal or state laws. A contract that's void is null as soon as it's created, and none of the parties are bound by the terms. A contract can be void if:

  • The terms aren't possible.
  • One of the parties didn't have a sound mind when they signed it.
  • The terms are against public policy or are illegal.
  • One of the parties was under the age of consent.
  • The rights of a party are constricted by the contract.

If someone is hired by an employer and the terms of employment have responsibilities that are illegal, the contract becomes void, since it does not stick to valid contract elements and is against the law. However, a voidable contract can be valid and enforceable in specific situations if both parties want to move forward with it. While one party is bound by the contract's terms, the other party can oppose it if there are legal reasons to do so. If the party who isn't bound rejects the terms of the contract, it then becomes voidable.

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