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What Makes A Contract?

In most cases, contracts and business negotiations go hand-in-hand. While verbal agreements are technically legal, they can often cause conflict over specific details, especially if one party believes the contract has been breached. Contracts between two entities are becoming more nuanced and detailed in an effort to make any and all possibilities clear should problems arise. Let’s take a look at some contract basics to see how different contracts can potentially be utilized between parties.

Enforceable Contracts

For a contract between two businesses to be effective, it must be clear and specific. The agreement must meet certain criteria to be legally enforceable as well. A legally enforceable contract can be used in court proceedings as evidence regarding a dispute.

If and when a business partnership goes wrong, a written contract is utilized in order to protect both parties. In order for a contract to be enforceable in a court of law, it must include the essential elements of an offer, an acceptance, consideration, and finally enforceability. If one party violates the details of the contract, the harmed party can then bring a lawsuit against the party it believes breached the terms of the contract.

Essentials of Business Contracts

There are several essential elements needed for a contract to be deemed valid and enforceable. These elements relate to the agreement itself, as well as to the parties involved.

  • Offer and Mutual Consent: Each contract must include a specific offer and a note of acceptance of that offer. Neither party can be coerced or forced to sign the contract; and, those involved must agree to the same set of terms listed within the agreement.
  • Consideration: In order for the contract to be valid, there must be something of value exchanged between the parties. This could be money or services, but both entities must participate in the exchange.
  • Competence: Those involved in the contract must be of sound mind in order to comprehend the seriousness of the agreement and to understand what is required. Neither party can be under the age of 18, parties must not be under the influence of alcohol or narcotics, and parties cannot have a mental deficiency. If one party is deemed incompetent, the contract isn’t valid and the incompetent party can disavow the contract entirely.
  • Legal Purpose: The contract must be created for legitimate and legal purposes. Any illegal activities, such as the distribution of narcotics or prostitution, would not be valid.

When Contracts Must Be In Writing

 Though some businesses try to avoid utilizing written contracts, it’s important to understand which contracts must be in writing no matter the circumstance. These can include any business dealings that would be done over a long period of time, as well as marriages.

While verbal contracts are not necessarily “void,” either party can easily reject them at any time. In some instances, contracts must be in writing in order for them to be enforceable, including:

  • Real estate transactions
  • Contracts spanning over one year to complete
  • Leases lasting over one year
  • Contracts involving money
  • Contracts lasting longer than the life of the parties involved
  • A transfer of property at the death of a party involved in the contract

Though verbal contracts still do occur, it’s always best to get the details of your agreement in writing. This ensures all parties involved understand their obligations and in the event court enforcement is needed, a written contract will detail the parties’ obligations.

Houston Contract Attorney

Contract disputes are one of the most common legal issues business owners can face, but with the help of a contract attorney, many disputes can be avoided. Our team of attorneys drafts business agreements and other business documents for small to medium-sized companies in the greater Houston area. In unavoidable disputes, the experienced attorneys at Adair Myers Graves Stevenson ensure your contracts stand up to the test of litigation. Contact us today.