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What is a Contract?

HandelontheLaw.com Staff Writer

Friday, November 22, 2013



What is a Contract?
Contract Law

A contract is an agreement between at least 2 people or entities (e.g., partnerships or corporations) including a promise to do or not do something in exchange for something valuable. The contract is one of the most important legal concepts and forms the basis of numerous interactions in American life. Several basic elements tend to be present to create a contract.


First, any people making the agreement must be legally competent to do so. Legal competence to contract is defined by state and federal statutes and common law but generally it means that the person: is at least 18 years of age; can understand and appreciate a decisions’ rights, duties, responsibilities, likely consequences, important risks, benefits and feasible alternatives.

Secondly, there must be an offer.

Third, there must be a promise to perform.

Fourth, there must be terms and conditions of performance, including for example the type, time or triggering event for performance.

Fifth, there must be an acceptance of the offer so there is a meeting of the parties’ minds of the parties.

Sixth, there must be valuable consideration, such as a promise or payment. Usually contracts that can be completed in 1 year or less can be oral contracts unless they involve real property or they are business contracts for goods worth at least $500.00. Contracts that cannot be completed in 1 year at most, or involve real property, or are business contracts for goods worth at least $500.00 must be in writing.

Having laid out those basic elements of contracts, we must acknowledge that the numerous interactions involving contracts create numerous variations of contracts. Some contracts are express contracts in which all the contract terms are specifically stated. These are, for example, written leases in which every term is spelled out. Other contracts are implied by the circumstances. Here a court typically finds that there is a contract because finding otherwise would be unfair to one party and/or would unjustly enrich the other party. An implied contract exists, for example, when you buy a new toaster and it doesn’t work. A court would find that there is an implied contract that the purchased new toaster will work for its ordinary purpose. Some contracts are unilateral, in which one party makes a promise or performs without getting a return promise beforehand. One example is an offered reward: a promise of the reward is made without getting anyone’s return promise that he/she will act; if he/she performs the actions spelled out in the reward offer, then the reward offeror must fulfill the promise by paying the reward. Other contracts are bilateral, in which both parties exchange promises. For example, a contract for the sale of real property would involve the buyer’s promise to pay the sale price in exchange for the property title and the owner’s promise to deliver the property title in exchange for the sale price.

As you have undoubtedly noticed by now, in the course of your day-to-day interactions with other people, you make many more contracts than you realize. You make “heavy duty” written contracts like prenuptial agreements, separation agreements, divorce settlements, apartment leases, contracts for the sale of real property, etc. You also make quickie, informal, oral contracts, such as carpooling (“You take the kids on these days and I’ll take them on those days.” “OK, agreed.”), buying goods (“This bagel I just bought is stale.” “I’ll get a fresh one for you, Ma’am.”), buying services (you get on a city bus and pay the fare; the city bus takes you to a stop on its route). You make contracts that are combinations of oral, written, implied, express, unilateral, bilateral and on and on. You see there? When interacting with other people or entities, you are negotiating and entering contracts all. the. time. Now, despite the fact that you are an “old hand” at contracts, some contracts are best prepared by specialists. When in doubt about whether a specialist is needed, I hire a lawyer who specializes in Contract Law. Naturally, the specialist will know what information is needed, how the contract should be drawn up and how it should be executed. When in doubt (and the bigger the stakes, the more you should doubt), hire a specialist.

DO’S AND DON’TS

DON’T be intimidated by the process or the people.

DO expect the usual contract to have:
a. Parties who are legally competent to enter the contract;
b. An offer;
c. A Promise to perform;
d. Terms and Conditions;
e. Acceptance;
f. Consideration.

DO understand the different requirements among contracts that are:
a. Oral;
b. Written;
c. Express;
d. Implied;
e. Unilateral;
f. Bilateral.

DO pay attention to all the contracts you enter in the course of a given day.

DO hire a lawyer who specializes in Contract Law when in doubt about whether your anticipated contract needs a specialist’s expertise.



By Kathy Catanzarite


[Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information cannot be guaranteed. Readers act on this information solely at their own risk. Neither HandelontheLaw.com, or any of its affiliates, shall have any liability stemming from this article.]


Source: Kathy Catanzarite - Handelonthelaw.com Staff Writer

Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.





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