If there’s one part of the legal system every single layman deals with, it’s contracts. Every day, we make new contracts, simply through conversations like “I’ll take you to the movies after you finish with the dishes” or “I’ll mow the lawn if you give me $10.” Even telling a 5-year-old “I’ll give you a cookie if you behave” is technically a contract.
No matter whether a contract is orally made or put into writing, every contract must have certain elements in order to be enforceable in court. These elements are:
- Offer – one party is clearly offering something of reasonable value
- Acceptance – the other party has clearly accepted that offer
- Consideration – all parties are “giving something up” in exchange for something of benefit
- Employees, for example, are giving up their time to service the company in exchange for income; vice versa, the employer is giving up revenue in exchange for the benefit of labor
- Capacity – all parties have the legal capacity to enter into the contract and are not considered incompetent
- Minors under the age of 18 can legally enter into contracts, but they are permitted to void the contract at any point until they reach 18
- Legality – the contract cannot involve any illegal acts, such as a business agreement to sell illegal substances
- “Meeting of the minds” – a term used to refer to the combination of an offer and acceptance and when all parties involved in the contract are on the same page regarding its terms with no misunderstandings
While the six above elements are considered to be the most basic parts of a contract, merely having these elements is not a full guarantee that the contract will hold up in court. For example, what if a party of the contract may have technically accepted the offer, but they were under the impression that the offer would be something different than originally promised? What if a party was considered competent at the time of signing the contract but developed problems rendering them incompetent and therefore incapable of carrying out its terms? These are all problems that must be tackled on a case-by-case basis.
Fortunately, the beauty of a contract is that these potential issues can be addressed long in advance. Contracts can contain much more within them than the basic “I will give you x in exchange for y,” although such a contract may actually be sufficient if the agreement is relatively simple. There are many common clauses that can be found in more intermediate contracts, such as severability clauses, governing law clauses, amendment clauses, and “entire agreement” clauses.
A severability clause serves an important function in longer contracts with multiple sections. It can be phrased in many ways but ultimately states if one or more sections of the contract are deemed invalid or unenforceable, the remainder of the contract not affected will still remain enforceable. This helps prevent the entire contract from being thrown out when just a small part has been negatively affected.
A governing law clause is also very important, as it determines what law will apply to the contract if it were ever under the scrutiny of a court of law. This is less significant for agreements pertaining to assets with fixed locations such as a home located in Florida; however, if someone plans to marry in one state but live in another, the number of headaches down the line can be reduced by determining which law applies, since some states are more strict with contracts than others. It’s important to note that you can’t just pick whatever state’s law you want; the governing law has to be a state to which you have a strong connection to. If you lived in Florida your whole life, you’d have a hard time convincing a judge you have a strong connection to Wyoming.
An amendment clause permits parties to make written amendments that can supplement or supersede certain terms of the contract, which can be helpful down the line if circumstances change. Otherwise, in the event of a contract dispute due to changes in circumstances, a court may rule that the contract is no longer valid, requiring everyone to start from the ground up again.
An “entire agreement” clause simply states that the written contract constitutes the complete agreement for the contract’s subject matter and supersedes any prior written or oral agreements. This helps centralize everything pertaining to a particular agreement into one single document, with the added benefit of preventing someone from claiming you agreed to something completely different during a past conversation.
As mentioned previously, people are able to enter into both oral and written contracts. An oral contract can be considered just as binding as a written one. However, it is harder to prove that an oral contract is in place, as there is no formal documentation. In the event of a dispute, the person alleging that the oral contract was broken would have to show a pattern of behavior that would indicate by a preponderance of the evidence (the burden of proof for civil courts) that such a contract was in place. Documents such as invoices, pay stubs, and even advertisements can all help prove that an oral agreement existed. While oral agreements can work well for some purposes, putting your terms into writing can go a long way in protecting both you and the other parties instead of relying on “he said, she said.”
While the best contracts are clear and concise, some subject matters simply require more complex contract clauses and sections, which can make things confusing if you’re not familiar with all the terminology used. If you have any additional questions regarding contracts, call Hendry & Parker, P.A, in downtown Dunedin, at (727) 205-5555 today for a free consultation.