Enforceable Contract: Everything You Need to Know
An enforceable contract is a contract that needs an offer and an acceptance. 6 min read
An enforceable contract is a contract that needs an offer and an acceptance.
When negotiating in a business agreement, one of the main considerations is whether the contract will be deemed as an enforceable under law. Constructed as legally binding instruments, a contract is a mutually assented to promise between two parties in a bargained for exchange. The steps to contract formation are: an offer; an acceptance; consideration; and enforceability.
Enforceable Law and Legal Definition
To enforce means to mandatory compliance with a contract. United States contract law provides that contracting parties have a right to commitment and enforceability. Parties mutually assenting agreement and signatory of a contract, are obliged to adhere to the rules contract law, by performing as promised.
Enforceable and Unenforceable Contract
An enforceable contract is a written or oral agreement that can be imposed in a court of law. If the law permits enforcement of a contract, execution of an agreement is the obligation of the assenting parties. Terms may not be violated or breached without causing the contract to void. Voidable or voided contracts are those that are null in effect due to one or both parties violating agreement with failure to perform or adhere to terms and conditions as promised. A credible defense must be found to cite void, giving the victim party the right to annul or rescind the agreement. In some cases, a court will determine unjust terms in the bargaining process, or in found to be in the confines of the agreement itself. Severability of a contract is a void as if it had never existed.
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Is the Agreement a Contract?
Contract litigation proceedings demands that a court determine if a contract exists and if it has in effect been violated. It must be evidenced that an arrangement valid to the construction of contracts be present to enforce the agreement according to U.S. federal contract law. Review if the original offer was something of value. The enforceable nature of a contract is a legitimate claim if legal analysis deems that the fundamental rule elements of offer-acceptance-consideration are identified to be part of the agreement.
What Authority Defines a Contract?
Reciprocal consideration is defined by one party to the contract offering something of value, and the other in receipt of it. Without contract formation, the same exchange is considered a gift from the offeror, rather than an enforceable contract. Legally, the terms and conditions to setting an agreement are more important than its said monetary value.
Contracts May be Oral or Written
Contracts are formed through written or oral agreement. Understandably, oral agreements are far more difficult to enforce than written contracts. Nevertheless, the law provides for oral contract formation, including oral rescission, and modifications. The Statute of Frauds provides the framework to contract amendment. Oral modifications are binding amendments to contract, in so far as the change is acknowledged by both parties. Still, some transactions such as those requiring land contracts, are only enforceable by way of written contract.
Valid and Invalid
The validity of a contract is in the details. Without the proper details, a contract is considered non-existent or invalid. This applies to customary requirements for certain fields, covering technological invention, or other patentable process.
An offer is the assertion of one of the party's desire to form contract with an offeree. The contract will become binding on acceptance of an offer by the second party. The offer can be expressed in a concise proposal to a second party writing such as a letter or email. Statement of initial intent should be available to the offeree for review. The offeree has the liberty to accept or reject an offer. Relations resulting from mutual assent to bind contract must be transparent. Terms should be stated, and considered definite. Tender bids and other requests for proposal are not categorized as offers, but public solicitations.
The final and absolute declaration of consent to the terms of the offer, acceptance acknowledges the intent and promise to perform by the offeror. U.S. contract law provides that the “mirror image” rule be enforced for the acceptance to be valid. An offeree’s acceptance to an offer must contain the exact terms of the offer for the contract to be valid. The “Uniform Commercial Code” UCC exempts the Mirror Image rule for contracts between merchants for the sale of goods. According to the UCC, acceptance made in conditional terms forms a portion of the contract, unless the arrangement tangibly alters the offer.
Common Law (Court-made case law)
Business service contract construction is guided by the rules of common law. The UCC does not cover services. Contract consideration according to common law, is enforced according to precedent set by court judges, and not part of a code.
Uniform Commercial Code [Tex. Bus. & Comm. Code]
A standardized set of principles governing the law of commerce, UCC does not pertain to service contracts. Solely focused on the sale of material goods and secured transactions, the UCC has also been widely adopted by foreign jurisdictions as international trade law.
An essential rule element of an enforceable contract, consideration equates to monetary compensation or a commitment. Consideration may also restrict another party from filing a lawsuit claim in dispute of the contract. Approval of both parties must be clearly indicated in the terms of the contract for it to be enforceable. An exchange of value must also be present for consideration to be valid.
Mutuality of Obligation
Assent or a "meeting of the minds" must be mutual for a contract to be enforceable. When two parties form and accept the terms of a legally sanctioned offer, obligation to performance is established. Duty to obligation is required by the law for both parties to exhibit that they have assented, performed, and thus abided with the terms of the contract. Mutuality of obligation obviates that any deviation from the terms of the contract may be considered a breach. Where contract tort law enters into the picture, is when mens rea (mental state) or intent is questioned in response to negligence creating legal liability for one or more parties to the contract. A victim of contract negligence can sue the other party for compensatory damages should the case be considered by the courts.
Lawful Subject Matter
The subject matter of a contract may not be in violation of the law or public policy for it to be enforceable.
The parties to a contract must be evidenced to be mentally competent prior to entering into a legally sanctioned agreement. Presumption that an individual is competent may be challenged if a contract violation has occurred, and the person is a minor, or incompetent, clinically insane, or abusing substance(s). The following outlines competency as it is described in federal law:
1. Capacity to Contract
A person must have the legal capacity to contract. Age or mental disability may disqualify a party from legal eligibility to contract. Where a party does not meet the legal qualification to contract, no agreement may be considered as a legitimate contract. Minor children cannot contract without the signature of a parent or legal guardian, who may also retract a contract at will.
2. Undue Influence, Duress, Misrepresentation
Agreements formed in a circumstance where a party has been subject to coercion, duress, false statements, improper persuasion, or threats is invalid. Misrepresentation includes the intentional withholding of information affecting the terms of contract. Undue influence experienced by a victim is a biased alignment of a person, and a justifiable reason for the courts to deny claims of breach by a party unwilling to comprise themselves with what is found to be unconsented to performance.
The Unconscionability refers to the disparity of the agreement due to differences in authority between the two parties, an inequity in election to form contract or an unreasonable bias or circumstance where one of the parties is illiterate or uneducated and was harmed by the said contract.
4. Public Policy and Illegality
Instead of the usual process of protecting parties involved in the contract, the defenses of illegality and violation of public policy exists to secure public welfare and the honor of the courts by denying the enforcement of certain types of contracts.
A contract will not be sanctioned by the court if it deals with illegal and/or immoral behavior.
Where both parties have made an error based on the terms of the contract, and those errors having a tangible effect on the agreed transaction, mistake may be found to be the reason that a contract is upended. Evidence that a mistake corresponds to facts at the time the contract was written allows for termination of the agreement on the basis that it was not adequate or in error. Mistake often enables both parties to sidestep a contract; thus, establishing no fault for the mistake.
Carelessness in reading the fine print before signing off on contract is a typical example of mistake. There are also situations wherein parties claim a mistake as defense to a contract after they have become conscious of terms they find non-beneficial. Most courts do not allow “no knowledge” as adequate justification for termination of contract, as signature by a competent adult implies that the terms to the agreement were read.
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