Understanding Contracts
The following are some basic contract principles to help you organize your legal life when it comes to entering into agreements with others.
What is a Contract?
Contracts are promises or agreements made between two or more parties, which are enforceable by law.
The basic way contracts are formed is one party makes an offer to another. The second party accepts and something of value is exchanged.
Who Can Enter into a Contract?
All adults of sound mind can enter into contractual agreements.
The key to someone being able to enter into a contract is really whether he or she is able to understand the nature of a legal obligation.
For reasons of public policy, children (usually those under 18 as defined by most states laws) can have contractual agreements they enter into declared void.
Written Contracts
The best way to protect yourself when dealing with contracts is to put your agreements in writing.
There are laws for each state, which specifically address certain contracts that must be in writing in order to be enforceable. Some of the most common examples include the sale of real estate, the purchase of goods costing more than $500, wills, and contracts that can not be performed within a year.
Oral Contracts
Besides writing, another way for parties to make valid contracts with one another is to do so through oral or spoken communication.
The downside to oral contracts is that relying on what is spoken only as the basis of an agreement makes it more difficult to prove the terms of the agreement.
Product Warranties
When you enter into a contract to buy goods, you should be aware that most products come with standard warranties. A warranty is basically a promise made by a seller or manufacturer that a product sold will perform as indicated and that the item doesn’t contain any known defects.
As a consumer, you should be most concerned with a product sold “As Is.” In this case it is truly “buyer beware” as to if the product will work at all. The seller or merchant is clearly stating there are no guarantees on the product and therefore, you buy it at your own risk.
Getting out of a Contract
A valid contract is a serious legal obligation, which should not be taken lightly. Once you enter into a contract with another party, all sides are required to fulfill the terms of the agreement. However, under certain circumstances, you can get out of a contract with no penalty.
What is a Breach of Contract?
Once a legal agreement has been made, if one party does not fulfill any part of bargain, it is called a breach of contract. A breach of contract is essentially a failure to do what was promised.
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