In order for an agreement to be a legally enforceable contract, it must meet certain requirements. While each contract is going to be different depending on the party’s needs, every contract should embody the following in order to be valid:
- Assent by Both Parties: Each party should demonstrate their agreement to the terms and definitions of the contract. Agreement may be shown by either words or conduct;
- Offer/Acceptance: One party needs to make the offer of a contract, and the other needs to indicate their valid acceptance of the offer. The offer and acceptance should be unambiguous and clear for each of the respective parties;
- Consideration: Each party needs to exchange something of value with the other. This usually takes the form of money paid for a product or service, but consideration does not have to be in the form of money. If there is no exchange of consideration as part of a contracted transaction, then any promises made are just that – promises and not contractual obligations.
Contracts can be completely oral or written, although the law requires that contracts dealing with certain transactions be in writing. Contracts are governed by state law and each state in the U.S. has laws designed to prevent fraud in contracts. A law of this type is called a “statute of frauds.”
The types of contracts that fall under the statute of frauds vary by state, but the most common types of contracts that must be in writing are:
- Contracts for the sale or transfer of an interest in real property;
- A contract that cannot be performed within one year of the date on which it is finalized. This would be a long-term contract such as a mortgage loan.
In some states; other types of contracts that must be in writing are:
- A contract for the sale of goods valued at $500 or more;
- A contract of the executor or administrator of the estate of a deceased person to answer for the deceased person’s debt;
- A contract to guarantee the debt or duty of another person, so serving as the co-signer on a loan made to another person;
- A contract made in consideration of marriage, which is known as a “prenuptial agreement.”
In order to satisfy the requirements of the statute of frauds, the written document must contain all of the following elements:
- It should state the identity of all parties to the agreement;
- It should identify the subject matter of the contract, e.g. what is being exchanged by the parties at a minimum;
- All of the terms and conditions of the transaction;
- It should identify the consideration, or things of value that are exchanged in the transaction;
- The signatures of the parties.
What If a Contract Requirement Is Not Fulfilled?
If the requirements for formation of a contract are not fulfilled, it can lead to the contract being declared void by a court. A party to a contract might discover that the agreement they thought they had is not in fact a valid contract. And if a contract is not valid, a court would not enforce it in the event that one of the parties to it fails to perform as promised.
Failing to provide the performances promised in a contract is a breach of the contract. Under normal circumstances a party who does not receive the performance that was promised by another party can sue for breach of contract. If a party suffers losses as a result of the breach of another party, they would be able to go to court to collect damages or pursue other remedies from the breaching party. If there is no contract, however, then the party who has been harmed by the breach of another party cannot pursue a remedy in court.
Also, the parties may be released from their contract obligations if the requirements for contract formation have not been met. On the other hand, a court might consider awarding damages if one party has already partially or substantially performed their contract duties and then encounters a breach from the other party. Of course, this would depend on the circumstances of each case.
Can Contracts Be Changed Later?
Contracts are final and binding on both parties once the parties have signaled their agreement to its terms. The parties must then perform their contract obligations as described in the provisions of the contract. However, if certain conditions are met, a contract may be modified.
Any change to a part or the whole of a contract is a modification. A contract can be modified before or after signing the agreement. If it is done after a contract has become final, the basic requirement for modifying a contract is the same as for entering into a contract in the first place.
All of the parties to the contract must agree to the modification. If any party does not agree, the contract cannot be modified. All valid contract modifications would be enforced by a court in a breach of contract lawsuit. So, they must be considered legally binding, again, if all of the parties have agreed to the modifications.
Both oral and written contracts can be modified. If the contract is a type of contract that must be in writing, then any modification of it should be in writing as well. And if the contract itself contains provisions regarding its modification, those would have to be respected if the parties wish to modify it.
So, for example, if a written contract states that it cannot be modified orally, then that clause should probably be respected. It would be smart to modify a written contract in writing rather than orally to make sure that the modification is enforceable.
The parties to a contract may want to modify it for any number of reasons, but some of the more common are as follows:
- The parties want to extend the duration of the contract;
- Changing the specifications for some goods involved in the contract;
- Changing quantities of goods covered in the contract;
- Changing terms of payment;
- Changing terms of delivery of goods.
A contract may need to be changed for other reasons that have nothing to do with the needs of the parties involved. For instance, the modification of a contract might be necessary if a statutory requirement requires it or market conditions change dramatically.
Of course, if the agreement that is the subject of a contract is at all complicated, it is probably best to have it in writing, even if that is not legally required by the law of the state that governs the contract. Or, if the subject of the contract is important to the parties and something they would want to be able to enforce in a court of law if necessary, then having it clearly documented in writing is best practice.
It is important not to confuse a contract modification or amendment, as it may be called, with a contract addendum. An addendum adds new and different provisions to an existing contract, whereas an amendment changes the existing terms of a complete contract.
Do I Need a Lawyer for Help With Contract Requirements?
Contract requirements are very specific and need to be met with certainty, if you want to be able to enforce your contract in a court of law. You should consult an experienced contract lawyer if you need help negotiating, drafting or modifying a contract. If you are not sure whether you have a valid contract, you need to get the opinion of a contract lawyer.
Your lawyer can help ensure that you and the other parties to any agreement meet all the contract requirements. Also, your lawyer can represent you in the event that there is a lawsuit for breach of the contract.