A contract is an agreement enforceable by law. A contract does not have to be signed, sealed, or witnessed. In fact, it does not even have to be in writing to be a binding agreement. It does however need to include the four elements below:
- Offer & Acceptance - offer, usually communicated by the offerer must contain decided terms of the contract. Acceptance, usually communicated by the offer, must be made clear.
- Consideration - something of value in the exchange between the parties involved in the contract.
- Capacity - both parties must have the capacity to understand the contract.
- Consent - both parties must mutually consent or agree to the terms of the agreement.
- Legality - a contract can not violate the law.
Cases that can invalidate contracts:
- Minors can void an existing contract either during minority or within a reasonable amount of time after- attaining majority.
- The contract entices a party to come to a crime or take part in illegal activity
- The contract was agreed upon through misleading or deceptive conduct, duress, undue influence, or unconscionable conduct.
- Consent to the contract did not occur due to misrepresentation of facts, mistakes undue influence, or duress.
You will encounter contracts in cases such as accepting an employment offer, signing a lease, purchasing or supplying a good, and partnering with other businesses. Here is a link to a great contract checklist. Before signing a contract:
- Read the contract in full, more than once. It helps if you print it out and go over it with a pen or highlighter. Take your time.
- Don’t be pressured into signing a contract if you are unsure.
- Ensure the contract reflects the terms and conditions that were negotiated. Go over all that is required from you and all that is required from the other party in detail.
- Get hold of common terms usually found by words such as, “shall mean,” “heretofore known as,” or otherwise wrapped in quotes as this could be a major point of confusion.
- Break down anything you do not understand, research it, ask for clarification, or better yet — get legal advice.
- Understand termination provisions.
- The thing of what could go wrong and ensure there are provisions to mitigate such scenarios.
- Never leave blank spaces on a signed contract – cross them out if you have nothing to add so they cannot be altered later
- Make sure that you and the other party initial any changes to the contract
- If the contract refers to an external reference, find it and read it.
- If possible make sure the contract is written and not verbal.
- Keep a copy of the signed contract for the record.
- If you are creative make sure to double-check copyright rights, exclusivity, and metrics or performance aka service levels.
- Phrases like “provided, however” or “provided,” It introduces a condition or conditionality to the contract rule you just finished reading or the one that follows.
- A phrase “notwithstanding the foregoing” or “notwithstanding any provision to the contrary,” should be understood as “in spite of the things previously mentioned or written.” It means that you are about to read a rule that trumps all other contract rules on that topic.
- The phrase “for the avoidance of doubt,” means the contract author really wants to make sure whatever comes next is clear.
Written By Dana M