Contracts are what keep the business world running. Think of how many contracts you have entered into. You have agreements with business partners and vendors. You probably have employment contracts.
Regardless of the type of contract, all attempt to accomplish the same goal. That is, you agree to do something in exchange for something else. With that in mind, here are three key components to any legally binding contract.
1. An offer
This is the beginning of any contractual relationship. You might offer certain goods or services to another party. Any offer should be made in clear terms, leaving no room for ambiguity. This means each party should have a firm grasp on what the expectations of the deal are. Unclear contracts are usually unenforceable contracts.
2. An acceptance
There’s no contractual relationship if the other party doesn’t accept the offer. An acceptance must be voluntary. Forcing one party to accept an offer will not make for a valid contract. Both parties must reach a mutual agreement.
3. Consideration
“Consideration” is legalese for “payment.” In the world of contract law, payment does not necessarily mean an exchange of funds. For example, you could agree to mow someone’s lawn in consideration for the other person to buy you dinner. Consideration may involve anything of value.
Some other components to keep in mind include an intent to have the contract be legally binding and that each party possesses the necessary competency to enter into the agreement.
A contract should outline the rights and responsibilities of each party. This can allow someone to seek remedies if the terms of the contract are not met. If there are any questions concerning a contract, you should seek advice from a skilled legal professional.
