What makes a contract legal and enforceable?

A guide by The Rozhik Law Firm

Every day, we encounter contracts. We agree to contracts when we download an App from the App store or when we purchase goods from an online web store. Read on to learn more about a legal contract and what it entails to have a legal and enforceable contract or agreement.

What is a Contract?

A contract is an agreement between two or more parties that creates mutual obligations. These reciprocal obligations are then enforceable by law. The fundamental elements required for the agreement to be a legally enforceable contract are an offer, an acceptance, mutual consideration, mutual obligations, and the capacity to form a legally binding contract.

Contracts are used in almost every area of business and daily living activities. They can be used in construction projects, for a purchase, the exchange of goods or services, for a building lease, for a commercial use agreement, or the similar.

What are the essential terms in a Contract?

Regardless of what your contract is for, the following are some essential and vital terms for a legal and enforceable contract. You must have all of these elements in your agreement to form a legal and enforceable contract.

Ensuring that you have these important terms in your contract will lead to fewer disputes over your contract or agreement with the other party signing the contract, saving you time, energy, and money.

• An offer-

The first critical component of a legally binding contract is called an “offer.” An offer contains both parties’ responsibilities and obligations towards each other under the contract. The offer must demonstrate and prove that there was value given in the agreement. Value can be monetary, goods, or services, but the value must be exchanged by the two or more parties to the contract to constitute a legally binding contract.

• Acceptance-

Once one party has “offered” a contract in exchange for some sort of tangible or intangible value, there must be an “acceptance” that is offered by the opposing party to the contract or agreement. Of course, the other party can reject the offer, but that would not be a binding acceptance of an agreement or contract. The other party must formally “accept” the offer and terms of the contract verbally or written to the offering party. When you “accept” a contract, it can look very different depending on the agreement or contract in question. It could be accepted as is, it could be conditionally accepted, or there could be an additional third avenue entitled an “option agreement.”

• Consideration-

Consideration is the concept of what each party is getting out of the contract. For example, for a lease contract, the landlord would be receiving the rental income each month or pay period, and the renter would be receiving the consideration of the ability to live in the rented property.

Consideration does not need to be monetary or have any economic value. It can be as simple as the ability for someone to utilize your pool while you are not home. In exchange, the consideration here would be the ability to use the pool, and the exchanged consideration would be to not have any claims against the person using the pool.

• Mutuality of obligation-

Mutuality of obligation is a legal term for the concept that both or all parties to the contract must agree to the specified terms. They can not utilize terms that were not discussed or divulged in the contract. Even if you think a concept is “industry standard,” if it was not written in the contract, then that is not an enforceable concept under your contract or agreement.

• Competency and capacity-

In order to be successful in agreeing to the contractual terms under a contract or agreement, both parties to the agreement must have the competency and capacity to agree to the terms. This means they must not be a minor or physically or mentally incapacitated to the point where they can no longer consent to be bound by the contractual obligations.

You must not also sign under duress or undue influence, like blackmail or other illegal activities. You must be of a sound and present mind to sign the contract, thus creating a legally enforceable agreement.

• Signatures-

For a contract or agreement to be legally binding and enforceable, there must be proof that both parties agreed to the terms together. Both parties must agree to be bound solely by the terms in the contract or agreement. One way to prove that both parties intend to be bound by the other party to the contract is by signing the contract in agreement. Both parties must sign the agreement for the contact to be valid and enforceable.

What makes a contract or an agreement “legal”?

When two or more parties form a contract together, you can think of the contractual agreement as promises made from one person to another that are legally upheld. As long as the contract or agreement has all the essential terms discussed above, you have a valid and legally enforceable contract.

The laws and regulations that contracts involve is upheld throughout all 50 states and by the New York State Civil Courts. The laws that pertain to contracts are dictated in the Second Restatement of Law, which the American Law Institute publishes. Additionally, the Uniform Commercial Code (“The UCC”) also contains relevant codes and regulations about the legality of contract making and enforcement.

If you have questions or concerns over a contract’s legality or ability to be enforced, this is considered to be a contractual dispute. A contractual dispute is when you disagree over the essential terms and elements to a contract- such as a lack of offer, no consideration, no mutual consent, or other critical components of a contract.

If you have any concerns over a contract’s legality or have a potential agreement or contract dispute in New York State, the knowledgeable and experienced attorneys at The Rozhik Law Firm are available to help you. Call them today at (917) 567-1963 for a free consultation.