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Legally Binding Contracts

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What Are Legally Binding Contracts?

A legally binding contract is a contract agreement that is valid under state and federal contract laws. “Legally binding” means that the parties must obey the terms written in the contract and perform their contract duties as stated.  Failure to do so may result in legal consequences, such as a damages award. 

For a contract to be legally binding, various requirements need to be met, depending on the nature of the agreement, as well as the background of each party. For instance, there needs to be a valid offer with a corresponding acceptance, and each party needs to exchange consideration (something of value).  In some instances, a written document is required. 

What Factors Could Make a Contract Invalid?

Some factors might invalidate an otherwise legally binding contract. For instance, the following factors might make a contract invalid:

  • Illegal subject matter- contracts for illegal activity can’t be enforced in court (i.e., a contract to sell illegal drugs).
  • Writing requirement- some agreements must be in writing or else they are invalid, such as contracts for the sale of real estate.
  • Coercion or contract fraud- A contract may not be legally binding if it was formed through the use of force or threats of violence or other types of harm.
  • Mistakes or unclear terms- There needs to be a “meeting of the minds” for there to be a legally binding contract. If one of the parties is unclear about a contract term, or if there is a mistake in the contract, it could invalidate the agreement.

Thus, it’s important that a contract be drafted very carefully, and subject to close examination before signing it. 

What Happens If a Legally Binding Contract Is Broken?

A broken contract can result in a “breach of contract” lawsuit. This may result in a damages award to reimburse the non-breaching party for any losses they have experienced. Alternatively, a judge may prescribe other remedies, such as a cancellation of the contract obligations, or a rewriting of the contract terms to include newer changes and updates.

Should I Hire a Lawyer if I Need Help with a Legally Binding Contract?

Contracts are a great way to ensure that an agreement remains enforceable under law. You may wish to hire a lawyer if you need assistance regarding a legally binding contract. Your attorney can help you draft and review the agreement to ensure that it will be recognized by the courts. Also, your lawyer can provide you with representation in the event that you have a dispute and need to file a lawsuit over a contract dispute.

Photo of page author Jose Rivera

, LegalMatch Legal Writer

Last Modified: 02-23-2015 01:50 PM PST

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