1. What Is a Contract?
2. Written Contracts
3. Who Can Enter a Contract?
4. Offer and Acceptance
5. Consideration

A corporate contract is a legal agreement between two or more parties that is done voluntarily and deliberately.

Contracts are mostly written but can be spoken or implied where most have to do with a sale or lease, employment, or tenancy. The main idea of the majority of contracts is a set of promises, also known as a consideration. The promises made by those involved define their obligations.

What Is a Contract?

A contractual relationship is determined as:

  • An offer
  • Acceptance of the offer
  • A valid set of promises, consideration

Contracts are enforceable in a court of law. If one side breaches the contract, the party which has followed the contract rules is entitled to go to court for loss or damages. Usually, the nonbreaching party's remedy is money damages, which is what was due to them had the contract been followed. At times, the courts can order for the breaching party to follow their contract obligations.

Contracts are a private law created by the parties in their agreement. The parties know their rights and obligations in their terms of a contract with statute limitations.

Written Contracts

Even if a deal is done by handshake, it's still legally enforceable and involves an exchange of promises. Most contracts, whether written or oral, are enforceable. Though, it's always best to have a written contract for all business endeavors.

There are many reasons why a written agreement is better than an oral one:

  • Writing down the contract's terms and rules forces the parties to think about what they're agreeing to. In an oral agreement, it's easy to change your mind.
  • When it's written, parties are more likely to create a complete and thorough agreement than they would had it been agreed upon orally because it eliminates who promised what. When an agreement is not written, the parties can likely have different recollections of what happened during their agreement.
  • Some contracts have to be written to be valid. For instance, the Copyright Act needs to have a license or assignment to be in writing.
  • In most states, a contract for the sale of $500 or more is required in writing.
  • If you have your agreement in writing, it will mean less dispute in court about the contract terms.

Who Can Enter a Contract?

  • Besides people who are mentally incapacitated and minors, all others are assumed to have the power to enter into a contract.
  • People who are a minimum of age 18 can enter a contract in most states.
  • Corporations can enter contracts through their employees, agents, or officers. If an employee has the capacity to enter into the contract on behalf of the corporation is determined by corporate law.
  • A corporation is its own legal existence from the employees, officers, or agents. Generally, these people are not responsible for debts or liabilities of the corporation.

Offer and Acceptance

  • One party, also known as the offeror, makes a proposal, which is agreed upon by the other party, also known as the offeree, and forms a contract.
  • When an offer is created, the contract is not valid until the offeree accepts the offer, but don't assume the offeree will accept this offer since contract liability is only valid on consent.
  • As an offeree, you cannot assume the offer will be open indefinitely.
  • An offeror is free to revoke the offer before acceptance by the offeree. If the offeror cancels the offer, the offeree doesn't have the legal power to accept the offer for the contract.
  • If you are an offeree, contract arrangements should not start until notifying the offerer of your acceptance.
  • Generally, there's more than one step in negotiations to create a contract since the offeree can respond with a counteroffer.
  • A counteroffer terminates the offeree's legal power of acceptance.

Consideration

  • Consideration is what one party will receive from the other party by following the contract terms.
  • If one party makes a promise while the other offers nothing back, the promise is unenforceable and is also known as a gratuitous promise.
  • Lack of consideration is a rare problem for business relationships since there is a mutual consideration for both parties.
  • The lack of consideration can arise in other contexts, such as amendments to contracts.

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