What is a contract? This is a question we don’t think a lot about, but there is a substantial amount of law regarding this. At its broadest, a contract is an agreement between two or more people to exchange goods, services, or money. However, as I’m sure you can imagine, these can be more complicated than that.
Law++ has published a great article on the legalities of what a contract is.
A contract requires one party to make an offer, the other party(ies) accept that offer exactly, and both parties to provide consideration. In other words, you have to agree on what each party is giving up. You may have heard the phrase “meeting of the minds.” That’s what this is.
Consideration is the legal term for what a party gives up. This is typically goods, services, or money. However, it can be anything a person is legally allowed to give. For example, a person can agree to not sell his or her land for a specific period.
For example, Software Licenses are contracts between end users and the company that owns the software.
The other major portion of Contract law is public policy. An agreement is not legally valid if it violates public policy. For example, an agreement to sell illegal goods would not be an enforceable agreement.
Certain contracts must be in writing. This is called the statute of frauds. If they’re not in writing, these agreements would not be enforceable. Absent these agreements covered by the statute of frauds, a contract can be oral or in writing. They can be done over text message or other electronic means as well.
Beyond oral and written contracts, there are also implied contracts. These exist when an agreement is created through the parties’ actions oppose to their words. For example, if a person mows your lawn every week and you pay every week, it is likely an implied contract if you never told him to stop.
The enforceability of the contract depends on (1) whether you have good documentation of that agreement and (2) whether your agreement is legally binding.
Almost all agreements are subject to contract law. Whether or not they’re enforceable depends on many of the factors discussed above.
Richard is the managing attorney for Law Plus Plus, a local small business law firm. As managing attorney, he helps small businesses and nonprofits startup, creating the contracts, and navigate the legal needs of businesses. Some of his practice areas include: corporate, contract, mergers & acquisitions, corporate litigation, and estate planning.