How do contracts work?

By The Law Office of Yoel Molina.

Contracts are enforceable agreements that permeate nearly every aspect of our personal and professional life. In your interactions with staff, independent contractors, vendors, commercial landlords, banks, utilities, insurance providers, and, of course, customers and clients, contracts are a constant issue if you own or run a business.
 
The fact that a contract is enforceable against the parties makes it unique and crucial for business transactions. The opposing party has legal recourse for any losses sustained if one party fails to uphold its end of the deal. This article examines the fundamental conditions for a legally binding contract, the contract as a written document, and the "contracting" process.

 
Contractual Conditions
Every contract (whether written or oral) must satisfy some standards in order to be upheld by a court. Let's examine each of them individually.
Consideration:  You give to me and I give to you, as Cole Porter penned in the song True Love. That's all there is to ponder. Each party must make a pledge to the other or give them something of value. There would be no contract if there was no exchange.
An offer and a consent: A specific or explicit offer to contract ("Do you want to buy this?") and an unequivocal acceptance ("Yes!") are required.
Legal intent: The agreement's goals cannot contravene the law. You won't be able to enforce, for instance, a loan arrangement with interest rates higher than those permitted by usury regulations or a contract to hire someone to rob a bank or murder your mother-in-law.
Competent parties: The parties must be aware of what they are doing in order to be "capable" of creating a contract. For instance, contracts entered into by children and the mentally ill are generally not enforceable because of the assumption that these parties don't realize what they're doing.
Mutual agreement: The phrase "meeting of the minds" may also be used to describe this. The main provisions of the contract must be agreed upon by the contractual parties, as well as their intent to be bound by it.
Federal and state regulations may place additional obligations on specific types of contracts on top of these broad guidelines. For instance, some consumer contracts must adhere to additional specifications, and others must be in writing.
 
 
A document that is the contract
A written agreement that often includes some or all of the following components is referred to as a "contract" in many contexts.
•           Initial materials (sometimes known as "recitals" or "whereas provisions")
•           Explanations of important terms, a description of the purpose or purposes of the agreement, and a list of each party's obligations (and conditions that may trigger obligations)
•           Reassurance regarding different areas of the agreement (sometimes phrased as warranties representations, or covenants)
•           Standard provisions
•           A signature block, as well as any appendices or exhibits.
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The Process of the Contract
Although "contract" is a noun, it can also be a verb. When you enter into a contract with someone, you take part in a procedure that normally comprises three stages.
Phase 1: Considering the transaction. Each party evaluates the potential agreement and its dangers ( "Can I trust her?") as well as make future projections ("Will I regret spending this much on the computer next month? Will it soon become dated? ").
Phase 2: Concluding a deal. The parties negotiate and come to an agreement on the terms during this stage, which is typically formalized by a written contract or another piece of evidence of the agreement (such as a receipt or purchase order, for example).
Phase 3: Performance and enforcement. The parties are legally obligated to fulfill their mutual commitments once the contract is in effect. If one party fails to perform, the other can sue to enforce the deal.
 

If you have any questions about this article or similar matters please contact our office, Law Office of Yoel Molina, P.A., at fd@molawoffice.com or at 305-548-5020, option 1