A contract is a legally binding arrangement between two or more parties. A contract supplies particulars of what the parties agree to perform or exchange. A contract may be in written or oral form. In most cases, to be legally binding, a contract must be in writing and signed by all parties concerned.
Courts typically require three things for a contract to be enforceable:
- Mutual assent, or agreement to the contract terms;
- A valid offer and acceptance; and
- Consideration.
Contracts are deemed the foundation of the business world. They may be easy or very complicated. Examples of contracts include employment contracts, real estate purchase agreements, and insurance arrangements.
Contracts must be entered into by all parties freely. All parties signing the contract must do so of their own free will and not under duress. Contracts can be used whenever parties want to document an agreement to ensure all parties’ rights are covered.
Drafting a contract refers to writing the terms and details of a contract to specify and summarize the legal responsibilities of all parties to the contract. This permits all parties to the contract to understand their duties and legal obligations to one another clearly.
Anyone can draft a contract, but it would be in the best interest of all parties involved to have an attorney draft a contract, particularly if it is intricate or complicated. For instance, a real estate agreement often involves multiple aspects, multiple parties, and intricate land descriptions. To ensure your sale or purchase, financial investment, and rights are shielded, having an attorney draft this type of agreement would be preferable.
A contract will also deliver sections outlining whether or not it may be canceled and how to revoke it. The agreement will also outline the results if a party breaches the contract terms. A well-written contract will contain explicit definitions of what comprises a breach of the agreement so all parties can support their responsibilities.
What Are the Elements of a Legally Binding Contract?
To be legally binding, a contract is required to include certain elements. Some contracts must be in writing to be valid, such as contracts for money over $500.00. A contract must be created for a lawful purpose. For instance, an individual cannot contract to perpetrate a crime. It is essential 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 satisfied;
- Terms and conditions of the performance; and
- Performance.
The offer and acceptance segments of a contract are also known as the “meeting of the minds” or mutual agreement of the parties. All parties’ signing of the contract is often used to prove that agreement. In some circumstances, offers may have an expiration period, where the offer is open for a reasonable time. Some offers may not have a time limitation. Offers can be withdrawn until the time of acceptance.
Acceptance happens when the parties agree to the terms of the offer. If a modification is made to the offer terms, it would be deemed a counteroffer. Different states have various regulations in this area of contracts, so it is essential to review local laws.
For a contract to be proper, consideration must be supplied. When both parties agree to provide something of value in exchange for a benefit, consideration ensues. For instance, consideration must be something of value and can include money, a car, or manual labor.
For a contract to be proper, all parties must be legally competent. Some people 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 contracting. All parties to a contract must be free from coercion at contracting. Contracts will be proclaimed void if there is a mistake, coercion, or deception by one or more parties.
What Is a Contract Assignment?
In a contracts setting, an “assignment” refers to transferring benefits or rights granted by the contract terms from the receiving party to a different party. Therefore, contract assignments bring an additional party to the existent contract parties.
An illustration of this is where a contractor assigns their right to payments to another party. The other party would then be entitled to fees for the contractor’s work. This is different from a contract delegation, which transmits obligations rather than rights to another party. Assignment usually ensues because it involves some potential for profit for the party making the assignment.
When Is a Contract Assignment Valid?
Contract rights and benefits can lawfully be assigned so long as no prior agreement prohibits an assignment. All required is for the assigning party (the assignor) to agree with the assignee (the third party recipient) that they will be transmitting their rights to them. The original party rendering the payment (the “obligor”) doesn’t usually need to be told that an assignment has occurred.
When assigning contract rights to an assignee, an oral agreement may suffice. Yet, as in any deal, it’s best to reduce the assignment to writing so that the parties have a record of the agreement in the future.
The validity of an assignment may depend on the kind of language used in the written agreement. It needs to be in the present tense. That is, the assignor must state, “I am assigning my contract rights to X party,” rather than “I will be assigning my contract rights to X party”
Are There any Limitations on Contract Assignments?
Typically, the parties are free to make assignments, so long as they stick to the following rules:
- The assignment should be permitted according to local, state, and federal regulations (for instance, some states make it unlawful to allocate wages to another individual)
- The assignment should only shield present transfers of rights and not future transfers.
- If the contract contains a specific “no-assignment” condition or clause, then an assignment can’t be made (if one is made in such a case, it may comprise a breach of contract)
- The assignment should not substantially change the contract or subject the obligor to losses or financial risks.
Also, any time an assignment is made, the assignor implicitly warrants that the rights are accurate, that they own the assigned rights, and won’t interfere with the party’s new claim to the rights. Assignments become proper when formed (even if the recipient is not yet cognizant of the assignment).
What Does a Contract Lawyer Do?
The tasks and duties of a contract attorney include preparing contracts, checking contracts, and ensuring their clients’ rights are safeguarded. Contract attorneys are experienced in the prerequisites of contracts and how to make sure they will be enforceable. These types of arrangements must often include certain legal aspects and language.
A contract attorney will help a company or person include the essential terms needed for their business needs and include any legal language the person may not know is required.
Do I Need a Lawyer for Help With a Contract Assignment?
Contract assignments can often become somewhat difficult, as they involve the privileges and responsibilities of many different parties. It’s in your best interests to speak with a contracts lawyer if you have any questions about a contract assignment.
Your lawyer will be able to examine the contract and the assignment terms to decide what your legal rights are. In the event of a lawsuit, your attorney can help represent your interests in court.
