A contract is a legally enforceable “agreement between two or more persons which creates an obligation to do or not to do a particular thing” (Blacks’s Law Dictionary) or in other words creates, “defines, and governs mutual rights and obligations among its parties” (Morawetz, Victor (1925-02-02). “The Elements of a Contract”).
A contract typically involves the transfer of goods, services, money, or a promise to transfer any of those at a future date. In the event of a breach of contract, the injured party may seek judicial remedies such as damages or rescission.
Why do we need contracts?
Contracts can help you succeed in business and also in personal transactions because:
- negotiating a contract forces you to think through all of the various scenarios and thus results in making a better deal than you would make without the contract;
- contracts that clearly outline expectations reduce the odds of a disagreement and minimize the risk of a dispute;
- allocating risk using contract terms you can take action to prepare for those risks;
- a well-drafted contract can help parties settle or litigate disputes.
How to conclude contracts?
To reach that agreement you need an offer from one party, an acceptance from the other, and something of value from both sides (payment, performance etc.).
You don’t need special language to make a contract enforceable. Plain language works just as well and usually even better. However, in a number of situations specific wording is needed (for example, in real estate transactions).
In general, contracts can be oral or written. Most oral contracts are enforceable, but they could be hard to enforce because the terms are hard to prove. That’s why we recommend always using written contracts.
When using a written contract isn’t possible, you can take some precautions. For example, after reaching an oral agreement, email the other party with a summary of the terms of the agreement and ask them to respond indicating acceptance.
In some situations a contract must be in a specific form – in writing and signed by the parties or sometimes even attested or notarized. This requirement is necessary to protect parties from someone claiming to have an oral agreement regarding something very important like debts, marriage, land, etc.
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If you need to draft an agreement, please take a look at Magilex’s extensive database of samples of contracts and contract clauses, which is updated daily. If you are not a professional lawyer and are in doubt about the specific form and details of your contracts, please be sure to consult a lawyer before signing.