What is a Valid Contract?
A contract is a legally binding agreement between two parties. Generally, a contract is formed when three important legal facts exist: 1) an offer, 2) an acceptance of that offer, and 3) an exchange of consideration (usually money) between the parties. While these are the minimal requirements to create a contract, quite often there are other legal requirements and state regulations that a contract must meet in order to be legally binding and enforceable.
Virtually all agreements entered into in a business setting are contracts. Some common business contracts include commercial leases, employment agreements, confidentiality agreements, purchase orders, and releases. The quality of these documents can have a profound effect on the health of your business.
What Happens if a Contract is not Fulfilled?
After a contract is validly formed, each party is required to perform its specific contracted duties. While performance of the parties’ duties fulfills the obligations of the contract, failure to perform a contractual duty is a breach of the contract. A breach arises when anything other than the promised performance is tendered. For example, if Jane offers to purchase John’s lawnmower for $500 and he accepts, a contract is formed. Satisfactory performance of the contract occurs when John provides the lawnmower and Jane reciprocates by paying the promised $500. However, if, for example, John provides a shovel in place of the lawnmower, or if Jane does not pay the full amount, then the contract is breached. Depending on the degree of the breach and the terms of the agreement, the breaching party would owe damages (usually in the form of money) to the other party.
Why Hire an Attorney to Draft or Review a Contract?
In a business setting, contracts can become extremely complicated. For example: what if the parties want to agree to settle any potential dispute in arbitration? What if there is more than one party involved in a transaction, or a potential insurance claim? What happens to your company if the other party is sued for actions arising out of the contract? As one can imagine, given the immense role that contracts play in the corporate / business setting, the possibility for problems is endless.
If you are about to enter into an important contract, engage an experienced business law firm to draft or review it for you. Don’t put your future financial security at risk. Hire a professional. The lawyers of Dickson Law Group have decades of experience in contract law. Let us put our expertise to work for you. Call now for a phone FREE consultation.