The rules and regulations that govern contracts are generally known as contract law. Contract law may deal with the conditions of the contract, whether there was mutual consent to accept the contract, whether the contract is legally binding, and related issues. Contract law is essential to most business dealings.
Facts about contracts
A contract is an exchange of promises between two or more parties to do or not to do an act that is enforceable in a court of law. Parties entering a contract must be competent and at least 18. Contracts cover a broad range of topics and include such agreements as property leases, prenuptial agreements, sales of goods, and employee contracts. If a contract is breached, the law allows certain relief.
For a contract to be legally enforceable, it must contain the following elements:
Offer and acceptance. One party must offer something to the other party, who accepts it. Both parties must know and understand exactly what is offered and accepted, and they must not be coerced into acceptance.
Consideration. Both parties need to bring something of value to the table; these are called "considerations." If one party is selling a car to another person for $10,000, for example, both the car and the payment are considerations. A consideration may also be a deterrent.
Performance. The agreement must be enacted according to the terms set out in the contract.
Types of contracts
Contracts may be unilateral or bilateral. In a unilateral contract, only one party makes a promise. The other party is not obligated to accept the offer (e.g., an offer of a reward may or may not be acted upon). In a bilateral contract, both parties exchange promises (e.g., an agreement to rent a house for a specified sum of money). Most contract law involves bilateral contracts.
Contracts may be written or oral agreements. Contracts that must be in writing vary from state to state but generally include transfer of interest in land and the sale of goods worth more than a certain value Oral contracts are generally enforceable but may be difficult to prove.
If you are writing a contract
It's important to understand contractual terms when drafting a contract, because any violation of the terms will be a breach of contract. Consequences for a breach of contract can include substantial financial damages.
A lawyer is valuable in helping you craft an enforceable contract in which all the legal implications are clear.