Whether we are downloading a computer application, renting a car, or hiring a contractor to remodel a home, contracts are an inescapable part of our everyday lives. For business owners, contracts are powerful tools for managing relationships with employees, vendors, banks, customers, and other stakeholders. Contracts are essential for successful business transactions because they are binding: when a party fails to meet the terms of a contract, the other party has legal remedies he or she can use to address the breach of contract. Creating and maintaining enforceable contracts helps business owners to protect their legal interests and ensure their businesses run smoothly.
Contracts do not need to be written to be enforceable. However, contracts put into writing are likely to be more complete and easier to enforce. Written, legally enforceable contracts tend to include several standard components, including:
- Definition of key terms
- Statement of purpose for the agreement
- Obligations of all parties
- Warranties, representations, or covenants
Enforcing Contracts & Agreements
For a contract or agreement to be legally enforceable, it must meet several prerequisites. The contract must include a consideration, which means each party must provide something of value to the other party. There also must be a clear offer to contract made by one party to the other, along with a clear acceptance of the offer by that party. A legally enforceable contract cannot include acts that are illegal. For example, a contract cannot be formed between parties for one party to pay the other to steal a car.
Who can form a contract also is subject to some parameters. Contracts may only be made between two “capable” parties. A capable party knows and understands the terms of the contract he or she is making. Under federal and state law, there are three categories of people who are considered incapable of contracting. These include minors, people with psychological disabilities, and people under the influence of drugs or alcohol. A contract formed with an individual from any of these categories can be voided by any of them.
The enforceability of a contract may be evaluated by asking several questions:
- Was there an offer?
- Was there an acceptance of the offer?
- Was there consideration?
- Did all the parties know they were entering into a contract?
- Did all the parties know they would be bound by this contract?
- Did all parties have the capacity to enter a contract?
- Is the contract legal?
Contracts & Agreements: How We Can Help
The business transactions attorneys at Payne & Fears can help clients with their various contract needs. This includes creating contracts to form business entities, creating non-compete, non-disclosure, and restrictive covenants, or handling partnership and vendor disputes. We draft and review several types of contracts, including non-disclosure, employment, joint venture agreements, partnership agreements, purchasing agreements, manufacturing agreements, distribution agreements, services agreements, technology agreements and licenses, mergers and acquisitions agreements, and others.
We also handle negotiations related to the contract if desired by clients. We pride ourselves on creating proper contracts and agreements and avoiding disputes wherever possible. Whether clients need help reviewing an existing contract or drafting an agreement from scratch, our business transactions attorneys take pride in providing quality advice tailored to the needs of each client.
For more information on our contracts and agreements work, please contact Richard K. Zepfel.