To ensure that a contract is legal and binding, there are certain elements that must be included and agreed to by all parties involved. Leaving out one or more of these elements may result in a breach of contract, and risks creating a contract that will not be upheld in a court of law should a dispute or conflict arise between the signing parties. Here are the most important elements of a contract, which are necessary for the documents to be legal and binding.
Signatures Representing the Party's Agreement to the Contract
No matter what clauses or conditions exist in the contract, it is necessary for all parties to be in agreement for the contract to be legal and binding. Typically, the signatures that are present on the contract show the party's willingness to enter into the contract and thus, his or her agreement.
While some verbal contracts are binding, there is a better chance of it being upheld in court if it is in writing. This is because a written and signed contract is proof of the party's agreement, whereas a verbal contract can be easily denied and disputed in court. A contract referring to two or several parties, but without signatures of those parties will most likely be considered void in a court of law.
An Exchange of Goods or Services
For a contract to be valid, there must be some type of exchange of goods, services, items of value or something similar. For instance, if you sign a contract with your local cable company, the goods you will be receiving is defined as the cable service. The exchange comes in when you agree to pay your monthly cable bill. If either parties renege on their part, the contract will be considered ‘not upheld' or ‘breached' and this typically includes penalties. With a cable contract, the penalty for not paying would be the termination of cable services. This process works similarly with other types of contracts.
The Process
A contract usually follows a process in order to be determined legal. The first step in the contract process is the offer. This is when one party offers something to the other party in exchange for something else. For instance, the cable company offers you basic services for $19.95 a month. Next in the contract process is the acceptance or rejection. If you agree to pay the $19.95 a month for the basic cable services, you have accepted the contract offer. If you do not want to pay that amount, and you tell the cable provider that – you have rejected the offer. You can also ask for time to think about the terms, which is not considered an agreement.
A counteroffer can also become part of the contract process. If you tell the cable provider that you'd like the services and will pay the $19.95 a month, but would like a premium channel included, you've made a counteroffer. The cable provider would then either accept or reject your counteroffer.
Although there are many additions, clauses and other information that can be included in a contract, these are the basic elements of a contract which determines the contract legal and binding. When these elements are present in your contract, you can rest assured that that your contract is most likely valid and legal.
