Examples of Contracts: Everything You Need to Know
When looking for examples of contracts, it's important to know what a contract is used for in the business world. Contracts are agreements between at least two entities or people, which creates legal responsibilities or duties on each side. 3 min read
2. Written vs. Oral Contracts and Implied vs. Express Contracts
3. Common Contracts to Know About
What Is a Contract?
When looking for examples of contracts, it's important to know what a contract is used for in the business world. Contracts are agreements between at least two entities or people, which creates legal responsibilities or duties on each side.
Some of the entities that might enter into a contract could include:
Every contract must meet certain conditions in order to be upheld in court. These specific conditions make the contract enforceable and include:
- Acceptance and offer
- Some type of meeting of the minds in regard to the contract's legal subject, such as agreeing on the sale and purchase of a vehicle
- Competency, or legal capacity
Contracts must also have specific and defined terms that include all details of the transaction and a clearly defined offer. This information is called the subject of the contract. For example, if a buyer wanted to purchase a used car from a dealership, the sales contract would typically include warranty information, the price of the vehicle, and how ownership or title will be transferred. All parties involved must have valid cause when entering into a contract. The consideration refers to the price, motive, reason, or other objectives that require the use of a contract.
Legal capacity or competency means that all parties must be able to make legal decisions. For example, minors wouldn't be able to enter into legal contracts until they reach the majority age. A person with a severe mental disability cannot sign a contract, and if they did, it would not be enforceable.
Written vs. Oral Contracts and Implied vs. Express Contracts
Oral contracts are verbal agreements made between at least two parties. Making some type of agreement in regular conversation could be enforceable, but it's much easier to enforce a contract that is written out in a document. A written contract is considered to be express, which means that all details are outlined and the subject is stated clearly.
Written, express contracts are required in situations such as:
- Selling services or goods valued at $500 or more, such as buying a car or hiring a professional to install a new roof on your house
- Selling or transferring real estate, such as leasing an apartment or office, or purchasing land or a home
- Making an agreement for services that take at least one year to complete, such as a one-year non-disclosure agreement or a 12-month maintenance service at your office
An implied contract, on the other hand, is an agreement with assumed details. For example, when you order a cappuccino at a coffeehouse, you entered into a verbal contract with the barista. You didn't expressly explain or clearly verbalize that you would pay for the coffee. Instead, your willingness to pay is implied.
Common Contracts to Know About
Several common types of contracts exist in the business world. For example, a non-disclosure agreement is used by companies who are dealing with potential employees, clients, or vendors and need to protect confidential and private information. If the signer of the non-disclosure agreement shares any of this confidential information, the other party can take legal action.
A bill of sale is a contract that clearly outlines the basics of a sales agreement, such as the involved parties, the agreed upon price, and the terms of the deal. This type of contract will also prove the legal owner's identity.
A promissory note is the legal version of an IOU and allows someone to borrow money from another person or business entity. The promissory note exists to keep a record of the loan and all of its requirements, including penalties, interest, and terms of repayment.
An employment contract sets the terms of employment, with details such as termination causes, bonus structure, and compensation.
A licensing agreement allows an inventor to make money on their creation or idea by allowing another person or business to use the idea. The licensing agreement will include details about any restrictions on reproducing the product, which is especially useful if you hold legal protection on your intellectual property but you need help from someone else to produce the item and make money. The agreement would likely include details about exclusivity and payment terms as well.
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