When people talk of contracts, often the first thing that comes to mind is a lengthy document filled with legal gibberish. Most have experienced and ignored the countless pages when they sign up for cable or a gym membership. Sadly, there can be some very important terms that people often ignore until a dispute arises. Still, while all that legal mumbo jumbo is often included and can be very helpful, it is not what makes a contract a contract. Stripping it down, you have your basic contract requirements:
If you recall, we recently posted an article on Gifting which had a lot of similarities to these requirements. If not, check it out HERE – No Takebacks!. The biggest difference, which we will get into, is the requirement of Consideration.
The above paragraphs talk about all those words in a contract which implies that a contract will be in writing. However, oral contracts can be enforceable in some instances. The law sets out specific examples of when a contract must be in writing. States often require contracts involving real estate to be in writing and contracts with a term over 1 year, for example. Needless to say, to make sure that the terms are clear to all parties and that an agreement ever actually existed, it would best serve all parties for the contract to be in written form.
The eventual agreement of a contract starts with an offer to make a transaction. Whether it be money for a service, money for a product, service for a service, etc, one party will approach another with their offer. The biggest aspect is the exchange of one thing for another, a promise by both parties to perform.This offer will be good for a “reasonable” amount of time. Yes, REASONABLE. Obviously open to interpretation, the term reasonable has been the source of many legal battles. The type of offer and business, and the specific facts of each situation will help determine what reasonable means in each scenario, so we won’t even try to define it. Just know that the best way to avoid any confusion is to be clear of the expiration of any offer. Regardless of the expiration, an offer can be revoked at any time before acceptance. Whether it be an oral or written contract, if the offer is not accepted verbally or in writing, it could disappear at any moment (unless an option is purchased, essentially buying time to think about it).
Acceptance is, as I touched on above, an act of accepting the offer as presented. Fully executing (signing) that contract or screaming “deal” immediately are ways to create a contract. Often, acting in reliance on discussions or beginning work as discussed can be interpreted as acceptance, forming a contract. The act of simply completing the transactions is seen as the contract having been created, accepted, and completed. It is important to note that a counteroffer does not in any way accept the original offer and, in fact, can be seen as rejection and takes the original offer off the table.
Consideration is the key. It was mentioned earlier that this is key element distinguishing a gift froma contract. In this scenario, both parties are trading something of value (legally, called “consideration”) for the other. If only one party is offering something, then we return to a one-sided promise, more often known as a gift. Consideration is seen as either a promise to do something that you are not legally obligated to do (such as paint a house, provide a TV, allow access to property); or a promise not to do something you have a right to do. Consideration does not need to be of equal value in order to form a contract. Sometimes, you just enter into a bad deal. One man’s trash is another man’s treasure. The law will not help you out unless the values are so different that something else very fishy was going on, for example if one party concealed information or acted unfairly.
This leads us into the last but important final and somewhat all-encompassingarea of contracts. The parties must be capable of understanding that they are entering into acontract, intend to enter into it, and truly agree to the essential and material terms.One cannot be defrauded into a contract.Underage kids are seen to lack capacity to enter into many agreements, and mentally ill people will not be held to their word. These scenarios include people that don’t know what they are getting into, can’t understand what papers they are signing, or simply are not in the right mind to be taken seriously in the eyes of the law.
The reason there is all the legal jargon in so many contracts is to avoid any blurry topics or line that would be cause for dispute. Over the years there have been countless efforts to eliminate ambiguity in contracts, yet every year there will be disagreements. That is why it is important to consult an attorney who can help in explaining a contract and seek to obtain a deal that protects your interests and your valued possessions.
Fred Antenberg is a Howard County Attorney who is familiar with contract law. He has experience in several areas on the law including contracts and can assist in your contract negotiations and disputes. CONTACT Fred today for your free initial consultation at 410-730-4404.Additional Information