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Contracts

Contracts are agreements that create obligations, and they are a necessity for almost all organizations or individuals doing business. A well-crafted contract promotes a productive and cooperative relationship between parties, and can also protect parties and save time, money, and headaches if a business deal goes sour. Even though many oral contracts are technically legal and enforceable (where the Statute of Frauds or other applicable law doesn’t require a written agreement), we recommend documenting your agreements in writing.

A contract should have clear and detailed terms and provisions to avoid disputes. A contract must include an offer and acceptance of that offer, and both parties must consent and be competent in order to create an enforceable contract. That means a party cannot be coerced or forced into signing a contract, and both parties must have the capacity to enter into the contract. Neither party can be a minor, mentally deficient, or otherwise unable to comprehend the contract. A contract must also be supported by consideration, meaning that both parties exchange something of value. The thing of value is commonly money, a product, or services. Finally, a contract to engage in an illegal purpose is not enforceable.

When negotiating a contract, it is important to consider the goals of both parties. Think about what you and the other party want to accomplish through the contract. You’ll also want to evaluate each party’s bargaining positions. For example, consider what strengths and weaknesses each party possesses. This will provide you with a more realistic vision of the end contract. That said, don’t feel pressured to settle. Instead, take time to negotiate in good faith for what you want to achieve

If subject to litigation, a court will generally read a contract as a whole, according to the ordinary meaning of the words. The court generally aims to honor the intentions of the parties at the time the contract was created, and where intention is unclear, courts also look to custom and usage in an industry or jurisdiction. If a contract term or provision is ambiguous, it will typically be construed against the drafter.



Written Contracts

Contracts are agreements that create obligations, and they are a necessity for almost all organizations or individuals doing business. A well-crafted contract promotes a productive and cooperative relationship between parties, and can also protect parties and save time, money, and headaches if a business deal goes sour. Even though many oral contracts are technically legal and enforceable (where the Statute of Frauds or other applicable law doesn’t require a written agreement), we recommend documenting your agreements in writing. A written agreement can proactively prevent misunderstandings by providing a framework in which the parties discuss important details of their arrangement.

Contract Elements

A contract should have clear and detailed terms and provisions to avoid disputes. A contract must include an offer and acceptance of that offer, and both parties must consent and be competent in order to create an enforceable contract. That means a party cannot be coerced or forced into signing a contract, and both parties must have the capacity to enter into the contract. Neither party can be a minor, mentally deficient, or otherwise unable to comprehend the contract. A contract must also be supported by consideration, meaning that both parties exchange something of value. The thing of value is commonly money, a product, or services. Finally, a contract to engage in an illegal purpose is not enforceable.

Goals and Negotiations

When negotiating a contract, it is important to consider the goals of both parties. Think about what you and the other party want to accomplish through the contract. You’ll also want to evaluate each party’s bargaining positions. For example, consider what strengths and weaknesses each party possesses. This will provide you with a more realistic vision of the end contract. That said, don’t feel pressured to settle. Instead, take time to negotiate in good faith for what you want to achieve.

Litigation and Contract Construction

If there is a “breach” of the contract, meaning that at least one party failed to fulfill its obligations under the contract, a common method for enforcing the contract and resolving disputes is through a lawsuit. If subject to litigation, a court will generally read a contract as a whole, according to the ordinary meaning of the words. The court generally aims to honor the intentions of the parties at the time the contract was created, and where intention is unclear, courts also look to custom and usage in an industry or jurisdiction. If a contract term or provision is ambiguous, it will typically be construed against the drafter.

 

FAQS

Q. What is a contract?

A. A contract is a legally enforceable agreement between parties to do something (or to not do something).

Q. What elements must a contract contain?

A.

  1. Offer: The promise by one party to do or refrain from doing a specific act in exchange for a return promise by the other party.

  2. Acceptance: The agreement by the party who receives the offer. Acceptance can be explicit (through an oral or written statement) or implied (through conduct). If changes are proposed to the offer, that will generally be considered a counter-offer.

  3. Intent: Both parties must intend to enter into a legally binding agreement.

  4. Consideration: Something of value must be bargained for in exchange for whatever is being offered.

Q. What is consideration?

A. Consideration is something of value promised in exchange for the contracted-for action or inaction. Consideration can be something such as money, services, or products. This element distinguishes a contract from a gift. 

 

Q. Does a contract have to be in writing?

A. The Statute of Frauds requires certain types of contracts to be in writing. Examples include contracts that cannot be completed within one year or contracts that involve a sale or transfer of land. If there is no specific local, state, or federal law requiring an agreement to be in writing, it is possible to create an enforceable oral contract. Of course, written agreements are much easier to enforce and almost always advisable.

 

Q. What terms and provisions should a contract contain?

A. Each situation and agreement varies, but a written contract generally contains recitals that introduce the parties’ intentions and obligations, definitions of key terms, representations and warranties, choice of law and jurisdiction provisions, severability language, indemnification provisions, confidentiality clauses, and other information describing the relationship, and rights and responsibilities.

             

 

Q. What is a breach of contract?

A. A breach occurs when one party does not fulfill their obligations precisely and exactly. This provides the other party with the opportunity to take legal action to enforce the contract. Many contracts will differentiate between material and non-material breaches, and non-material breaches may not give rise to litigation or damages.

Q. What remedies are available if a party breaches a contract?

A. Specific remedies are often negotiated for, but common types include money damages, injunction, or other equitable remedies.

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