What is a Contract? Simple question. Everyone conceptually knows what a contract is. However, there are a lot of finer details.
What is a Contract?
At its simplest, a contract is a legal agreement between two or more people. Legally speaking, a contract is a legal device that exists once certain conditions are met. It must have an offer, acceptance, consideration, and not be against public policy. For our purposes, we’ll be talking about contracts that are not for the sale of goods or real estate. Those have their own unique rules.
To have a contract, someone must make an offer. Your offer must be sufficiently clear. It must include all the essential terms of the agreement.
Once an offer is made, it stays open until it lapses, is rejected, or is rescinded. If you make a counteroffer, you’re rejecting the original offer. That is legally a rejection plus a new offer.
An offer lapses after a “reasonable” amount of time has passed or the time specified in the offer.
You can accept an offer in many ways. You can accept by saying “I accept.” Or, you can accept by signing on the dotted line. One lesser realized way of accepting is through performance. If you’re given a contract, and then start performing under that agreement, you’ve likely accepted it. Certain exceptions apply. One such exception is the Statute of Frauds.
One very important piece of information is that the acceptance must be the same as the offer. You can’t change the terms and expect it to be valid.
Consideration is not your thoughts on a matter. It is whatever each party gives up under the agreement. Typically, this is money, goods, and services. However, it can include a lot more.
Consideration can include giving up legal rights you have, like the right to sue someone. Consideration cannot be things you don’t have a legal right to. For example, you cannot sell someone else’s property. Additionally, you cannot agree to break the law, as you don’t have a legal right to do that.
Not Against Public Policy
If you have an otherwise valid contract, a court will not enforce it if it violates public policy. Violations of public policy cover a wide range. One of our most common examples is a non-compete contract that is overly broad.
There is some overlap between contracts in violation of public policy and ones that are void on their face. A contract is void for many reason, including violation of public policy.
Certain contracts with minors are void on their face. Contracts where one or more parties is incompetent are automatically void. Contracts that are impossible to perform are also void, but be careful as part of the contract may still be valid on those.
Contract Enforcement and Retention
Just because you have a contract does not mean you are absolutely protected. You must also be conscientious of contract enforcement and retention.
Oral contracts are generally enforceable. However, certain types of contracts must be in writing in order to be valid. See Statutes of Frauds. The main concern you face is proving the terms. That’s why we recommend memorializing any oral contracts if you can’t get them in writing.
Breach of Contract
Finally, if there is a conflict arising out of a contract, you’ll have to go to court. Your main cause of action is breach of contract.
If you’d like any help with your contracts, Law++ would be happy to work with you. Feel free to reach us by email at email@example.com or by calling (919) 912-9640.