How to Successfully Form a Contract - Part 1

When it comes to business contracts, there are a few things that you want to keep in mind to ensure your contracts are both effective and legally enforceable. Legally speaking, a contract must have an offer from an offeror, an acceptance from an offeree, and an exchange of value (e.g. money for goods). Any contract with these elements will likely be deemed legally enforceable in a court of law should a dispute arise.

Though it’s not required to put your contract in writing, your important business arrangements and agreements should be put into writing to protect your interests. Simply put, oral agreements are too ambiguous and difficult for a court to enforce. This means you are basically at the whim of the party you made the agreement with when you make an oral contract. While this is fine for small things like getting your tires rotated on your car, it can’t be how you run your business.

Let’s go over a few more basics that you’ll want to keep in mind when you draft contracts for your business.

Business Contract Basics

There are volumes written on contract law, but let’s instead start with a few basic rules that any business owner can benefit from following:

1. The contract must include two or more parties and be signed and agreed to by all parties.

2. There must be an offer made by one party, the offeror.

3. The contract must be legal and moral. In other words, you can’t sign a contract that requires you to steal money. Such a contract would be found void.

4. The offer must be accepted by the offeree. This means no counter offers or rejections.

5. There has to be an exchange that takes place between the two parties (like paying money for services).

Now this is just a short little list. Depending on the type of contract you are working with, there may be other essential things you also want to keep in mind. Keep in mind that each state has slightly different contract laws as well, so these things can vary a little from state to state.

 
Yoel Molina, Esq. (AKA “Mo”)

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