As a business owner, contracts undoubtedly play a major role in your life. Have you, however, ever wondered exactly what a contract must contain so as to be legally enforceable?
The Legal Information Institute explains that each of your contracts must contain the following four elements:
- Offer and acceptance
1. Offer and acceptance
The offer is one party’s promise to the other party to do or not do something. The other party shows his or her acceptance of that promise by signing the contract.
In addition to signing the contract, the accepting party must also promise to give the offering party something in exchange for his or her promise. Usually, the consideration is a sum of money; however, it can be virtually anything of value.
For example, if one of your suppliers promises to deliver a certain number of widgets to you on or before a certain date, your consideration likely will be a certain amount of money, which amount is also set forth in the contract.
It goes without saying that both contracting parties must have the capacity to enter into the contract. This usually means that each party must be at least 21 years of age and must have sufficient intelligence to understand exactly what the contract requires him or her to do or not do.
Finally, each of your contracts must have a legal purpose. In other words, they must not require either party to engage in any form of illegal behavior or criminal activity.
While you have the right to enter into both oral and written contracts, you stand the best chance of court enforcement, should you need it, if you do, in fact, enter into only written contracts.