Writing Contracts: Everything You Need to Know
Writing contracts are important, as they are legally binding on all parties involved. 3 min read
2. When a Contract is Void
3. Consideration: Exchange Something of Value
4. Enter Into a Contract in Good Faith
Writing contracts are important, as they are legally binding on all parties involved. Contracts identify the applicable terms of an agreement, as well as additional provisions for certain unanticipated events, payment schedules, budget, etc. First, you should determine whether you actually need a contract. Keep in mind all of the requirements that must be included when entering into a contract. A contract has three elements, including an offer, acceptance, and consideration.
Legal Capacity to Enter Into a Contract
Next, you want to ensure that all parties are able to enter into the contract, meaning that the person is an adult with legal capacity to enter into the contract with you. Furthermore, if you are entering into a contract with a business, then you’ll want to make sure that the other person is authorized to enter into a contract on behalf of the company. There are some other items of consideration when entering into a contract, including:
- All parties must be at least 18.
- If a minor wants to enter into a contract, the guardian could potentially do so on his or her behalf.
- Most states allow emancipated minors to enter into a contract as if he or she were an adult.
- All parties must be mentally competent (legal capacity).
Keep in mind that not all adults have the legal capacity to enter into a contract. For example, if an adult has a mental disability, then he or she might not be able to enter into a contract.
When a Contract is Void
Furthermore, a contract becomes void in any one of the following circumstances:
- If either party is intoxicated when the contract is signed
- If one of the parties isn’t legally able to enter into the contract
- If the contract was entered into under duress or coercion
Consideration: Exchange Something of Value
Now that you’ve made the offer, and the other party accepted, you’ll need to exchange something of value, which deems that both parties have agreed to enter in the contract (consideration). The consideration can be anything from cash, a product, intellectual property, or just the promise to exchange one of those items. The terms of your contract must be understandable and clear by both parties. For example, a contract that is clear in terms includes: John agrees to sell his computer to Mary for $100 on February 14, 2018. It is clear what is being promised here, how much it will cost, and when it will be done.
However, the following terms would not be acceptable: John agrees to do something, to be identified at a later date, for Mary in exchange for Mary’s money (amount unknown at this time). Here, there is no clarity or understanding as to what is to be done, for how much, or what is even being offered.
Enter Into a Contract in Good Faith
All parties entering into the contract must agree on all terms identified in the contract. Those terms must be specific in order for the contract to be valid. Therefore, both parties must completely understand what is expected of them. Further, all parties must do what they can to satisfy what is identified in the contract. If either party fails to act in good faith, then that might constitute a breach of contract. Such examples would include lying about the condition of the item (i.e., computer), engaging in bribery, or mere violations of the contract (i.e., failing to sell the product after you receive the money).
Some verbal agreements are allowed and are considered legally binding. While it is better to have a written contract, some courts allow for verbal agreements. However, it is best to follow up the verbal agreement with a written contract to ensure that you have all items in writing to prevent future legal dispute.
If you need help drafting 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.