A contract is a legally binding agreement between two or more parties. A contract provides details of what the parties agree to perform or exchange. A contract may be in written or oral form. In most cases, in order to be legally binding, a contract must be in writing and signed by all parties involved. Courts generally require three things for a contract to be enforceable:
- Mutual assent, or agreement to the contract terms;
- A valid offer and acceptance; and
Contracts are considered the foundation of the business world. They may be simple or very complex. Examples of contracts include employment contracts, real estate purchase contracts, and insurance contracts.
Contracts must be entered into by all parties voluntarily. All parties signing the contract must do so of their own free will and not under duress. Contracts can be used any time parties want to document an agreement to make sure all parties’ rights are protected.
Drafting a contract refers to the act of writing the terms and details of a contract to determine and outline the legal obligations of all parties to the contract. This allows all parties to the contract to have a clear understanding of their duties and legal obligations to one another.
A contract can be drafted by anyone, but it would be in the best interest of all parties involved to have an attorney draft a contract, especially if it is detailed and/or complex. For example, a real estate contract often involves multiple parts, multiple parties and complex land descriptions. In order to ensure your sale or purchase, financial investment, and rights are protected, having an attorney draft this type of contract would be preferable.
A contract will also provide sections outlining whether or not it may be cancelled and how to cancel it. The contract will also outline the consequences if a party breaches the terms of the contract. Aa well-written contract will contain clear definitions of what constitutes a breach of the contract so all parties can uphold their duties.
What Are the Elements of a Legally Binding Contract?
In order to be legally binding, a contract is required to contain certain elements. Some contracts must be in writing in order to be valid, such as contracts for an amount of money over $500.00. A contract must be made for a legal purpose. For example, an individual cannot contract to commit a crime. It is important to be familiar with the requirements of a valid contract.
A valid contract must include:
- An offer;
- An acceptance of the offer;
- A promise to perform;
- A valuable consideration;
- A date, a time window or an event when the performance must be completed;
- Terms and conditions of the performance; and
The offer and acceptance elements of a contract are also known as the “meeting of the minds,” or mutual agreement of the parties. The singing of the contract by all parties is often used as evidence of that agreement. In some cases, offers may have an expiration period, where the offer is open for a reasonable time. Some offers may not have a time limit. Offers can be revoked until the time of acceptance.
Acceptance occurs when the parties agree to the terms of the offer. If a change is made to the offer terms, it would be considered a counteroffer. Different states have different laws in this area of contracts, so it is important to review local regulations.
For a contract to be valid, consideration must be provided. Consideration occurs when both parties agree to provide something of value in exchange for a benefit. Consideration must be something of value and can include money, a vehicle, or manual labor.
For a contract to be valid, all parties must be legally competent. There are individuals who cannot enter into contracts, such as minors or the mentally impaired. A party must be of sound mind and not under the influence of drugs or alcohol at the time of contracting. All parties to a contract must be free from duress at the time of contracting. Contracts will be declared void if there is a mistake, duress, or fraud by one or more parties.
What is the Statute of Frauds and to What Contracts Does it Apply?
Under the Statute of Frauds, courts will not enforce certain types of contracts unless they are in writing. The purpose of the Statute of Frauds is to attempt to prevent fraudulent acts. The types of contracts governed by the Statute of Frauds include:
- Marriage contracts;
- Contracts not to be performed within one year;
- Contracts involving an individual’s promise to pay the debt of another;
- Contracts wherein an estate executor agrees to personally pay debts of the estate;
- Contracts involving the sale or transfer of land; and
- The sale of goods over $500.00.
The Statute of Frauds is governed by the Uniform Commercial Code, or “UCC.” The UCC is a model statute that has been adopted by most states in the U.S. It is most often used to resolve contract disputes over the sale of goods. The Statute of Frauds may vary from state to state, but most are similar to the UCC.
What Constitutes Adequate Consideration?
Adequate consideration is what must be exchanged for a contract to be enforceable. As noted above, consideration must be something of value. There are certain principles a court may consider when determining adequacy of consideration:
- Consideration may be a promise to do or not do something, such as a promise to quit drinking alcohol;
- Past consideration, or a promise to perform a duty that has already been performed or an act the party is already legally bound to do, is never adequate;
- If both parties agree to the consideration, even if it may not appear adequate, it may be considered adequate;
- Consideration based on an illusory promise or a worthless item is never adequate;
- Consideration cannot be nominal, where the amount or performance promised is too low for a court to recognize, often the sum of $1.00; and
- Consideration is not adequate if it violates public policy because the law cannot recognize such an exchange.
When Is a Contract Not Enforceable?
A contract may not be enforceable under certain circumstances. As discussed above, a minor or mentally incompletnet individual cannot enter into a contract. A contract may not be enforceable if there is not adequate consideration. A contract may not be enforceable if there was a mistake, fraud or one of the parties was under duress.
What is a Contract Lawyer?
A business contract lawyer is a lawyer who specializes in providing assistance with business contracts. They may be specially educated or experienced in certain areas of law and business. They have knowledge of contracts, contract requirements, and laws governing contracts in their area. Business contract attorneys often draft, review and negotiate business agreements for their clients.
Some contract lawyers choose to specialize in certain areas of the law. These can include sales agreement contract review and intellectual property contracts. Intellectual property contracts usually involve licensing of the intellectual property and can be complex.
Some contract lawyers specialize in tax contracts in order to help their clients with things such as property tax, international tax and corporate taxes. Other specialties include employment contract attorneys, affiliate agreement attorneys and subscription agreement attorneys.
What Does a Contract Lawyer Do?
The duties and responsibilities of a contract lawyer include drafting contracts, reviewing contracts and ensuring their clients’ rights are protected. Contract lawyers are experienced in the requirements of contracts and how to make sure they will be enforceable. These types of contracts must often include certain legal elements and language.
A contract lawyer will help a business or individual include the necessary terms needed for their business needs as well as include any legal language the individual may not know is necessary.
How Much Does a Contract Lawyer Cost?
Contract attorney rates vary based on the experience of the attorney at the facts of the case. There may be different fees for different parts of the process such as drafting, negotiation and breach of contract.
The cost of a breach of contract case will vary depending on the factors involved. Some contracts provide various scenarios of how attorney’s fees will be paid by the parties. The claims asserted and their complexity may be a factor. Other factors that may affect the cost of attorney’s fees include:
- The attorney’s hourly fee;
- Whether the attorney is paid hourly or a flat fee;
- The number of hours the attorney spends working on the case;
- The amount of filing fees set by the local court system; and
- Whether the case goes to trial or is settled outside of court.
Do I Need a Contract Attorney?
Contracts can be complex documents. It is important to consult with an experienced contract lawyer during the drafting process and if any disputes arise out of the contract. An experienced contract attorney will assist with the drafting and review process.
A contract attorney can also ensure safeguards against complications, errors and/or misunderstandings within the contract. A contract attorney may also assist in preventing legal issues that arise from a poorly written contract and represent you in court if needed.