About Contracts

Contracts are legally binding agreements between two or more parties. The parties that enter into a contract can be individuals, businesses, organizations or agencies. A contract outlines what must or what must not take place between the two parties that enter into the agreement in exchange for something of value. A contract is a formal promise. There is a whole area of law that deals with contracts called contract law.

Significance

A contract provides assurance and protection for those who enter into it. A contract outlines the specific information, like the who, what, when, where and how that the parties have agreed on. When one party does not live up to its side of the agreement, or breaks its promise, the contract is breached. When a contract is breached, legal action can be taken that can force the parties to keep their promises. Having a contract assures you that you are getting what you agreed to in the time and fashion you agreed to get it.

Features

For a contract to be legally binding it must have a few key ingredients. First, both parties must be able to enter into a contract. Second, a contract must include "consideration" or what one party has agreed to give in order to get. Third, there must be a meeting of the minds. Both parties must be clear to what they are agreeing to. Fourth, a contract must be accepted. A contract can be accepted by making a verbal or written agreement or by starting to perform the obligations of the contract. Often times, a counter-offer will be made on a contract and the contract may be modified a few times before both parties will agree to it.

Warning

Having a written contract is always best. A written, executed contract is proof that both parties agreed to and entered into to the terms of the contract. A contract can help to prevent miscommunications and assumptions. Having a written contract allows you to spell out specifically what the details of the agreement is and once executed, shows that both parties have read and agreed to those details. A signed contract can also be used as evidence in a breach of contract law suit.

Types

There are oral contracts and written contracts. Oral contracts are verbal agreements and written contracts are written agreements. Some states have laws that require certain types of contracts, like sales of property or contracts that take longer than one year to live out. If you enter into a verbal contract in a situation where you state requires a written contract, your contract may not be enforceable by law. There are also contracts between different types of parties, like businesses and individuals, for cell phone services, or between two individuals, like in a personal loan.

Benefits

There are many benefits of having a contract. A contract can assure you that you get what you were promised. A contract also clearly outlines the terms of agreement so that there is no confusion or miscommunication as to what the responsibilities of each party are. Written contracts provide evidence in the case that a contract is breached. Written contracts prove that an agreement was indeed entered into.