Contract Qualifications: Everything You Need to Know
Contract qualifications consist of many components. Contracts include clauses that define each party's responsibilities and obligations, among other things.3 min read
2. The Offer
4. Legal Intent
5. Competent Parties
6. Acceptance of Offer
7. Mutual Assent
Contract qualifications consist of a variety of components. Contracts include clauses that define each party's responsibilities and obligations as well as how disagreements and breaches are addressed.
Requirements for a Contract
Contractual agreements are part of doing business. From employment contracts to agreements with vendors and partners, contracts are legally binding documents which pervade almost every aspect of our business and personal lives. In fact, many business owners keep an attorney on retainer to go over every contractual agreement they encounter, just to ensure it's in their best interests and that the agreement is legal and binding.
If one party involved in the contract doesn't hold up their end of the bargain, the affected party can pursue legal remedies for monetary damages. This situation is called a “breach of contract,” and refers to a person who fails to uphold his or her responsibilities specified in the contract.
Any legal contract may be subject to arbitration, mediation, or lawsuits, but you can include a clause in a contract which identifies how disagreements and breaches should be settled.
Federal and state laws also govern how breaches of contract are handled and what additional requirements are imposed on the parties involved.
Every contract starts with an offer, which discusses the “why” of the document. The offer section states what the parties have agreed to upon signing the agreement.
The offer must state in no uncertain terms that all parties understand their expectations. For example, an offer for an insurance contract is made when the insurance applicant submits the application with the premium. In real estate, the contract will state who is purchasing the property as well as provide identifying details about the property.
Every contract must have consideration, which details what a party will pay to complete the contractual obligations. In other words, consideration is when each party provides something valuable to the other party. Without consideration, a contract cannot exist.
Payments are loosely defined in contracts because the consideration isn't always money. For example, a real estate contract between a building owner and tenant might specify that the tenant gets to live in the building while improvements are being made to the property. There is no monetary exchange, but the tenant still receives something of value.
A contract's legal intent refers to each party's intention. All contract terms must abide by state laws and regulations. Without that legal intent, the contract is not legally binding or valid.
For example, if a person signs a contract agreeing to rob a bank, the contract is not valid because the action is not lawful.
All parties involved in the contract agreement must be competent, meaning that they must be capable of entering into a contract by law. Parties can include:
Whatever the nature of the party, those involved are only considered capable if they understand what they are doing by entering into the agreement. Minors and insane individuals are not considered capable, and any contract they sign cannot be enforced by law.
In order to be competent, parties must:
- Be of legal age to sign the agreement
- Have the mental capacity to understand what they are signing
- Not be impaired in any way at the time of the contract signing
Even being under the influence of alcohol or drugs while signing a contract could void the agreement, because the signer wasn't considered competent at the time. Certain senior citizens or disabled individuals may not be considered competent, especially if an illness like dementia is involved.
Acceptance of Offer
An acceptance of offer occurs when parties sign a contract and agree to its terms. This acceptance must be voluntary, meaning that the person cannot be under duress when signing the contract.
Certain situations like being blackmailed or having a gun pointed at one's head certainly qualify as duress, which means any contract signed under these conditions is not legally binding.
Parties must mutually agree to the contract terms without outside influences when accepting the offer.
Every contract must include mutual assent, which is a “meeting of the minds.” In other words, all parties must be in agreement on the essential terms without coercion.
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