What is a contract?

What does a legally binding agreement include?
By The Law Office of Yoel Molina.

Contracts are legally binding agreements that adhere to most aspects of our personal and business lives. If you own or manage a business, you have to work through contracts all the time whether it be with your employees, contractors, vendors, commercial landlords, banks, utilities, insurance companies, and of course, customers.

A contract is unique, and essential to business transactions, if it is binding on both parties. If one of the parties involved does not fulfill their part of the bargain, in this case the other party has the legal recourse for the damages coming. In this article, the Law Office of Yoel Molina analyzes the basic requirements that a legally binding contract must contain.


The requirements of the contract

To be enforceable in court, all contracts (whether written or oral) must meet several requirements. Which are:

Consideration. As the saying goes "You give me and I give you". That's what consideration boils down to. Each party involved must supply something of value to the other party. Without this exchange, there is no contract.

Offer and acceptance. There must be a clear or definitive offer to contract and a clear acceptance.

Legal purpose. The agreement must have a purpose that must not violate or break the law. For example, a loan contract that charges interest above usury laws or a service contract to hire someone to rob a jewelry store or kill his wife cannot be enforced.

Capable parts. To be able to enter into a contract, the parties must have an understanding of what they are doing. One example is the assumption that minors and the insane generally do not know what they are doing and, for that reason, the contracts they enter into will not be honored under certain circumstances.

Mutual feeling. It is sometimes known as a "meeting of the minds". The contracting parties must intend to be bound by their agreement and must agree on the essential terms.

These generalized rules are tied to federal and state laws that may impose more requirements on certain types of contracts. For example, certain contracts for consumption have to obey additional requirements and other contracts must be strictly in writing.

The contract as a document

The term "contract" is used to refer to a written agreement, which generally includes some or all of the following elements:
introductory material (sometimes known as "recitals" or "recital provisions")

Definition of key terms

The statement of the purpose or purposes of the agreement
the obligations of each party (and conditions that may trigger obligations) warranties as to various aspects of the agreement (sometimes expressed as warranties, representations, or covenants)
boilerplate provisions, a signature block, and
attachments or annexes.

The contract as a process

"Contract" is a noun, but it can also be used as a verb. When you hire someone, you participate in a process that generally has three phases.

Phase 1: the contemplation of the deal. Each of the parties involved makes an evaluation and analysis on the possible deal and its risks ("Is this person trustworthy?") or predicts what will happen ("Will I regret paying this price for this phone next month?"). ? wouldn't it work?").

Phase 2: An agreement must be reached. Through this phase, the parties go through a negotiation and the terms are agreed, usually formalized in a written contract or some other documented evidence of the agreement (such as a receipt or purchase order).

Phase 3: Execution and compliance. Already when the contract enters into force, the parties involved are legally bound to comply with their mutual requirements. If one of these does not comply, the other party may sue to enforce the agreement.

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