Definition of a Contract

A contract is a legally binding agreement between two or more parties in which an offer is provided and accepted by those concerned. It is written to govern the rights and duties of each party for the successful completion of a particular action. This may involve the exchange of goods, services, money, or promises of any of the aforementioned. If either party fails to meet his or her obligations in the contract, the injured party is granted access to legal remedies that include damages and cancellations according to law.

Contract Samples

Browse through the following samples to see how you can create a contract for your business or personal use.

Why Do You Need a Contract?

Writing a contract might seem like a lot of work, but it offers a ton of benefits for entities to eliminate potential hassles caused by oral agreements. If you’re thinking twice about asking your clients to sign a contract, you might want to consider these points:

Contracts provide a clear definition of each responsibility. It’s easy to forget what was agreed upon during your initial discussion with a client. Rather than going back and forth with your argument, it’s always better to have everything down in writing. This will help you avoid any discrepancies or confusion by defining the exact terms and conditions of the agreement in full detail.Contracts bind parties to their assigned duties. It can be difficult for both accounts if one party attempts to back out of an agreement without a valid reason or prior notice. With a contract, you can secure the rights and resources of your business and take the issue to court in the event of a breach.Contracts establish a time frame for each task. Some projects and transactions are more urgent than others. This can be crucial for parties that are strict on time, especially when these timelines can greatly affect company operations.

Key Elements of a Contract

An enforceable contract is generally comprised of the following elements:

Offer: Every contract begins with an offer. This refers to the arrangements proposed to one party by the other, including the definite terms to be set once the agreement is made effective. For instance, if your proposal is to sell a few batches of custom-made shirts, then the contract must discuss the quantity, price, and delivery date of the said orders. The other party also has the right to accept, reject, or amend the offer until further notice.Acceptance: Once an offer has been proposed and understood, it can be accepted in person, in writing, or over the phone. This must be done with an obvious declaration that the accepting party has agreed to be bound by the other party’s terms.Consideration: Each party in the agreement must provide something that is of value to the other. It may involve currency, a promise to perform a particular act, or a promise to refrain from doing a certain act. This can include any product, service, or action that was proposed, as long as the court can verify that each party’s consideration possesses sufficient value.Competence: This refers to a party’s ability to enter into a contract based on their legal capacity. Some of the most common reasons for incompetence include age, disability, and whether a party signed the contract under the influence of drugs or alcohol. That’s because the parties who fall under the said categories are not in the right state to fully understand the terms of the contract that was entered and freely consent to its terms. Thus, in most cases, they are allowed to rescind their acceptance of the offer in order to void the contract.Mutual Consent: Unless a party is proven to be incompetent, it is assumed that the contract had been freely consented to. Mutual consent is crucial to ensuring that both parties had read, understood, and agreed on the terms presented in the document.Legality: Even if the contract follows the rest of the items stated in this list, it is only enforceable if the activity in the contract is legal. Illegal activities such as asking someone to commit assault, murder, or any other criminal act is strictly prohibited; otherwise, the contract would be voided and the concerned parties, once caught, may face legal charges against them.Writing: Under the Statute of Frauds, it is said that certain contracts must be written down in order to become enforceable. This includes large transactions between two entities, as well as any promises or agreements that were made according to a critical list of terms and conditions. It is also best to have your contract in writing as proof of the agreement.

Contract FAQs

Some of the commonly asked questions regarding contracts include the following:

How do contracts work?

A contract simply addresses the who, what, when, where, and how of an agreement for the concerned parties to refer to. This is done by describing all the required parts in full detail. This includes the obligations, expectations, and responsibilities of all the parties involved in the agreement. Once the contract has been read and understood, the parties may choose to sign or decline the agreement immediately or delay the signing for further negotiations.

Do you need a lawyer to write a contract?

You can easily form an agreement with the other party by writing your terms down on paper or shaking hands on it after a discussion. However, this does not mean the contract may be enforceable in the court of law. A legally valid contract is best written in the presence of a lawyer. Working with an attorney to make a contract will help ensure that the document is legal and admissible in court. You can have the attorney assist in drafting and reviewing the document before it is signed. An attorney may also play a significant role if you choose to get out of the agreement or in the case of a breach of contract.