Updated August 19, 2020: 

What are Terms and Conditions of a Contract

What are the terms and conditions of a contract is a common question among parties entering into a contract. When dealing with contracts, both parties should fully understand all elements of a contract.

Elements of a Contract

The contract itself must include the following:

  1. Offer
  2. Acceptance
  3. Consideration
  4. Parties who have the legal capacity
  5. Lawful subject matter
  6. Mutual agreement among both parties
  7. Mutual understanding of the obligation

When it comes to the key three elements that make up the beginning stages of the contract, you’ll need to ensure that there is an offer, acceptance, and consideration. First, an offer must be made by one party to another party. Next, the party receiving the offer must accept it. Then, there must be consideration exchanged between the parties. This could be a monetary amount or a simple promise to act under the contract.

When it comes to the legal capacity of a party, keep in mind that those under the age of 18 or those who are mentally incompetent don’t have the legal capacity required to enter into a contract.

While all contracts are unique, there are certain terms that are commonly used in all contracts, particularly business contracts. These are generally referred to as the terms and conditions of a contract.

Terms and Conditions: An Overview

Such terms and conditions will identify the rights and responsibilities of both parties. This can include general and special conditions. A general condition is one that is common and included in most contracts. Special conditions are those that are specific to that contract, i.e., payment, price variation, penalties, etc.

Be mindful that when someone refers to the terms and conditions, he is not referring to the overall contract. Instead, he is referring to certain legal terms within the contract or some type of non-negotiable contract document. When someone is referring to an actual contract, he isn’t referring to such terms and conditions identified therein. He is instead referring to the overall contract or legal relationship between the parties entering into the legally binding agreement.

When thinking of what types of contracts you’d find terms and conditions in, you can think of any type of contract, as all contracts should have terms and conditions. For example, it could be a contract for the sale of the property, a warranty, an employment contract, a consulting agreement, a lease contract, a joint venture, etc.

Are Terms and Conditions Required?

While they aren’t required or legally mandatory, terms and conditions are incredibly beneficial for both parties. It essentially gives you the right to terminate the contract if the other party fails to abide by such terms and conditions. An example of when they would be very helpful is if you operate a SaaS application. If users abuse your website or mobile application, then you can terminate their account. Specifically, you’ll include a termination clause in the terms and conditions that inform users of such termination if they abuse the service in any way.

Furthermore, let’s assume that you own and operate a social media site, similar to that of Facebook, Instagram, or LinkedIn. You’ll undoubtedly want to have a lengthy list of terms and conditions to advise users that if they abuse any term or condition identified in the contract, then their account can and will be terminated. This could include posting illegal or fraudulent material, or material that constitutes copyright infringement. Furthermore, if a user’s account name violates a trademark, then the account name will be denied. While it can be rather difficult to find out if any users are abusing the terms and conditions, such businesses generally have their own department dedicated to reviewing such material on a daily basis to ensure that users are not engaging in illegal or fraudulent activity.

If you own a business that sells products or services, you can cancel certain orders if the product price is incorrect. In order to do this, you’ll need a provision within the terms and conditions section of the contract informing users that certain orders, at the sole discretion of your business, can be canceled if the product(s) that are ordered are incorrectly priced due to manual errors.

If you need help learning about the terms and conditions of a contract, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.