The Importance of Legal Contracts

When you participate in a trade or other such transaction, it is key to make sure that it is a legally binding contract. A contract works to formalize a certain type of agreement, whether it is employment, intellectual property, etc. With a formal contract, all parties involved can know exactly what is expected of them, the terms of the agreement, and any other information that is pertinent to the exchange.

There are two types of contracts, oral and written. Obviously, oral contracts can be very difficult to prove since it is basically one person’s word against another. On the other hand, written contracts should contain several different elements to help them stand up in legal proceedings. To aid with oral contract legality, some states require evidence that both parties did agree to certain terms, or you can have the key parts put down on paper and signed.

However, if you are wanting to create a document that will stand up against legal action, your best bet is to contact a lawyer to help make sure that you have successfully fulfilled all of the important parts of a legal contract. The elements of a legally binding document usually include the following.

First, and perhaps most obviously, both parties must acknowledge that the contract exists. This is sometimes called a “meeting of the minds” or mutual consent. Basically, one party extends an offer, and the other person accepts the offer and its terms by signing the contract. With an acceptance, the second person must wholly agree to the terms of the agreement. If there is any sort of a counter-offer, even if it still involves the same elements, this generally counts as a rejection of a contract.

For example, let’s say that you are offering a house for sale for $250,000. If a person agrees to pay exactly this amount, then you are in agreement about the contract. However, if the possible buyer gives you a counter-offer, such as agreeing to pay up to $200,000 for the property, this counter-offer may require you to develop a completely new contract reflecting the change in the terms. Keep in mind, however, that you are allowed to request additional information. This in itself does not count as a counter-offer.

Also, both parts of the trade must include something of value, whether this is a service, item, money, etc. And once a person comes through with their half of the agreement, the other party must fulfill theirs as well. Of course, a contract can include terms like no delivery of an item until payment, or no payment until the item is delivered.

In a business, keeping valid contracts is especially important. This is because corporations are basically build on trading their goods or services for money from customers. In the inside of a company, employers make contracts with their employees, which can bind them into performing at the level of expectation.