Contracts 101 -While not maybe realizing it people enter into contracts all the time as a business person, a homeowner or a recent graduate who is renting. Whether at the office or at home, any time you or your company agree to take some action or make a payment in exchange for anything of value, a legal contract has been created. A few examples are bills of sale, employment agreements, utilities such as gas or electric, loans, credit card agreements and other common business transactions which are all legally enforceable contracts.
What is a contract?
A contract is a legally enforceable agreement between two or more parties that creates an obligation to do or not do particular things. A ?party? to a contract can be an individual person, company, or corporation. A contract, to be enforceable, almost always contains the following essential elements:
- The parties have to be competent to enter into a contract. For example, a mentally disabled person could not enter into a contract. Another example is minors who may enter into contracts, but can void them in most cases before they reach majority age.
- There has to be a mutual agreement by all parties; i.e., all parties have a meeting of the minds on a specific subject. Stated another way the parties are in agreement as to what obligations each has in the contract. Each party either promises to perform an act that the party is not legally required to perform, or promises to abstain from performing an act that it is legally entitled to perform.
Does the Contract have to be in writing?
Agreements that have to be in writing to be enforceable may be different from state to state but usually involve:
- (i) the sale or transfer of real estate (for example land or a house);
- (ii) sales of goods valued at over $500 (a car or computer); and
- (iii) contracts that require more than a year to perform (takes more than 12 months to complete or finish your performance under the contract).
Leonard Schneider is a partner in Liles Parker PLLC in the Houston, Texas office. The firm focuses on health care audits, business contracts, general corporate and business litigation matters and municipal law. He can be contacted at email@example.com or at the firm website www.lilesparker.com. The Houston office number is 713-432-7474