What Do You Know About Contracts?

What Constitutes A Valid Contract?

In order for a contract to be valid, there must be elements of proof that are met. These elements include that the contract is an agreement between two parties; these parties are competent; the agreement is based on the genuine assent of the parties involved; the agreement is supported by consideration; the agreement is made for a lawful objective; and the agreement does not break the law. If any of these elements are missing, the contract may not hold up in a court of law.


Is An Agreement The Same Thing As A Contract?

No, an agreement is an element of a contract, but if all six elements of a contract are not present, then it is not considered a contract.


What Is An Agreement?

An agreement is when an offeror makes an offer and a offeree accepts it. There must be both an offer and an acceptance present for an agreement to be in place, and an agreement must be present before there is a contract.


What Is An Offer Then?

An offer is when an offeror intends to create a legal obligation. This intent can be shown by their actions. For example, when a written contract is sent to another party, the action constitutes an offer. An offer cannot be made jokingly, or under any circumstances that would cause a person to believe there was no legitimate intent to enter into a legally binding agreement.


What Makes A Party ‘Competent?’

A competent party is someone who has ‘contractual capacity’ before the agreement is made. Contractual capacity is the ability to understand that a contract is being agreed to as well as an understanding of the general nature of the contract. If a party is deemed incompetent, then the contract could be thrown out. This does not mean that if a person fails to completely understand all aspects of the contract (i.e. if someone didn’t know about fine print charges) that the contract will be thrown out.


How Old Does Someone Have To Be To Agree To A Contract?

In most states, any person below the age of 18 is deemed by law to have a lack of contractual capacity. With a few exceptions, contracts made by minors are deemed voidable and the minor may avoid the legal liabilities of the contract. If a contract is agreed upon before a person reaches the age of majority, a minor may ratify the contract, and therefore make it legally binding once they turn 18. One of the most common exceptions to this age limitation is if a contract is for the reasonable value of necessities (i.e. food, clothing, and shelter). Loans to cover necessaries are also considered necessaries as well.


If There’s A Mistake In The Contract, What Affect Does It Have On The Enforceability Of The Agreement?

If there is a unilateral mistake that is made by one party, such as a misunderstanding of a facts (i.e. mistaking water-resistant with waterproof), then the customer cannot legally get out of the contract (unless the sale was made under false pretenses that water-resistant actually meant waterproof). If both parties in a contract make the same mistake regarding a key factual matter, then the agreement is deemed voidable. For example, if there is a key aspect to a contract that cannot be performed for whatever reason (i.e. the act would be illegal), but both parties agreed to the contract thinking that all aspects could be performed, then the contract can be voided.


Does A Contract Have To Be In Writing?

A contract does not necessarily have to be in writing, but it does need to be communicated to be a valid offer and therefore, a valid contract. If the offeree hears about the agreement indirectly, they cannot accept the offer until it is communicated to them through the offeror. It is important to note that verbal contracts are often difficult to defend in court, so it’s always a good idea to get a contract down on paper.


Can An Offer Be Withdrawn Without My Being Held Liable?

Yes, an offer can be withdrawn before acceptance of the offer, prior to the formation of contract. If an offer is terminated, an attempt to accept a contract after the termination has no legal standing. All that is required to show intent to revoke an offer is a communication of this intent with the opposing party.


What Are Some Other Ways That An Offer Can Be Terminated?

Offers can be terminated by: revocation of the offer by offeror; a counteroffer by the offeree; a rejection of the offer by the offeree; a lapse of time; a death or disability of either party; or performance of the contract becomes illegal after the contract is made. Typically, the termination of an offer must be directly or indirectly communicated to the offeree. If the offeror seeks to revoke the offer, but the offeree accepts the offer before notice of the revocation, a valid contract is created.


What If I Signed An Agreement Without Reading It? Is That Contract Still Valid?

A person who has the ability and opportunity to read a document before signing it is contractually bounded by the terms of the document, even if the person did not read it. Even If a person is unable to read or understand the terms of an agreement, they are still bound to the terms of agreement, since it is assumed that they should have tried to obtain an explanation of the agreement. The big exception to this rule is if the other party knows, or has reason to know, that the signer cannot read. Some Courts may hold that the contracting party should have read the document and explained the terms to the other party.


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Revised: Feb. 11, 2016, 5:50 p.m.
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