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What is a Binding Agreement?

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What is a Binding Agreement?

A binding agreement is one that is enforceable under state or federal laws.  Such an agreement is said to be “legally binding” under contract laws.  In order for an agreement to be binding as a contract, there usually the following factors usually need to be met:

  • Offer and acceptance:  One party needs to make a clear offer, and the other needs to accept in a way that is unambiguous
  • Exchange of consideration:  The parties need to exchange something of valuation (called “consideration”); otherwise, a one-sided exchange may simply be classified as a gift. 
  • Some agreements require a signed writing (such as the sale of a home or other real estate)

Thus, there needs to be a clear indication that the parties understand the agreement terms, and that they are willing to enter into such an agreement under the negotiated terms.

What Factors Would Not Make an Agreement Binding?

Failure to meet any of the above requirements can make an agreement not legally binding.  In addition, other factors can make an otherwise legitimate agreement into one that isn’t valid.  These include:

  • Contract fraud or coercion-  The agreement can’t be entered into under conditions involving force or threats of harm
  • Mistake or misunderstanding between the parties- Sometimes the enforceability of a contract may be affected if one or both parties didn’t fully understand the terms
  • Contracts for illegal subject matter are not valid

In most cases, a non-binding agreement can’t be enforced in court.  In some cases, if both parties consent to it, the court may allow them to re-write some or all of the contract, in order to save the business relationship between the parties.  In other cases, the judge may issue a damages award if one party’s conduct has caused the other party to experience losses.

Do I Need a Lawyer for Help With a Binding Agreement?

It’s important that agreements be created in such a way that they are binding and therefore enforceable under law.  You may wish to hire a lawyer if you need assistance with a binding agreement.  Your attorney can help you with the drafting, reviewing, and editing of a contract document.  Also, your lawyer will be able to provide representation in court if you need to file a lawsuit over a legal dispute. 

Photo of page author Jose Rivera

, LegalMatch Legal Writer

Last Modified: 06-19-2013 11:45 AM PDT

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