The Basics of a Legally Enforceable Contract

Contracts can (and normally by design are) complex and confusing. In the most basic sense, a contract is a legally enforceable promise, but not every “promise” or “agreement” is a contract. However, when they are, there are common elements to look for:

The First Element: Offer 

For a contract to have legal effect, there must first be an offer. This generally means that one person communicates to another the willingness to enter into an agreement. Depending on the circumstances, an offer may not have to be formal or even in writing. Offers can be made orally.

That being said, a legal “offer” should not be confused with negotiations. If the person who receives the offer knows that it is just the start of negotiations and not a final offer, then the law will most likely not allow a binding acceptance to be made. Underscoring all of this is the legal principle of “reasonableness.” Would a reasonable person think that a final, binding offer was made? This question may have to be answered in court if a dispute arises.

Acceptance: Agreeing to the Offer

While we may think that accepting an offer means signing on the dotted line, saying the words “I accept,” or even a firm handshake, legal acceptance is not quite that simple. Formally accepting an offer is not always necessary. What often determines a legal acceptance of a contract is, once again, “reasonableness.” If a reasonable person would understand your words or actions as accepting an offer, then there is a very real possibility that you have legally accepted, even if you subjectively believe you did not accept.

Acceptance can be further complicated if the offer requires acceptance to be made in a specific way. Someone could require acceptance to be made orally, in writing, or by performing specific actions. Not properly accepting might mean there was no acceptance at all, but if the offer is not specific, acceptance could be made in just about any manner and by any means that a court deems reasonable in the circumstances.

How long do you have to accept an offer? This is once again left up to reasonableness, as offers stay open for a “reasonable” amount of time unless otherwise specified.

Consideration is What Makes a Contract Binding

While a legally binding contract requires an offer and an acceptance, those two alone are not enough. Generally speaking, there must also be “consideration.” Without consideration, agreements can be offered and accepted without becoming a binding contract.  But what is consideration? This is not “careful consideration” like you might ordinarily understand the word to mean. Instead, it is a distinct legal term.

What is Consideration?

Consideration means that the parties of a contract “bargained” their respective promises in exchange for the other’s promise. The basic idea is that each party to an agreement is doing something that induces a promise from the other party. Think of it like this: “I do something for you; you do something for me.”

Examples of Consideration in Contracts

A simple example of consideration might look like a basic exchange of goods or services, like paying someone to mow your lawn. This gives you the benefit of their promise (they promise to mow your lawn, and you get the benefit of a well-maintained lawn) and they get the benefit of your promise (you agree to pay them for mowing the lawn, and they get a financial benefit). They probably would not mow your lawn for free, and you probably would not just give out money to a landscaper without doing work. The payment was made because of the promise to work, and the work was done because of the payment. Legally speaking, that is a “bargain,” and that means there was consideration.

Consideration is complex, and it is important to look at the law where you live to help understand when your promises may be binding. What’s more, there may also be circumstances where a promise is binding, even without consideration.

Why You Might Need Legal Assistance

Confused yet? We understand. There are many issues, elements, defenses, and remedies that may arise in a contract dispute, and laws and interpretations can vary depending on the state or jurisdiction. For those reasons, it is beneficial to have an experienced attorney to assist you in drafting, reviewing contracts, and even disputing contracts.  Contact The Law Group of Northwest Arkansas PLLC today to speak with an attorney that will help you navigate contracts. 

Disclaimer

The Law Group of Northwest Arkansas PLLC (TLGNWA) provides general information about a variety of legal issues on this website as a public service. Information contained herein should not be considered legal advice on any specific matter. The use of information and reference links contained in this website do not constitute contractual, de facto, implied or any other form of attorney-client privilege or relationship. TLGNWA is not responsible for the use of information, forms, links, or documents contained in this website.

Due to the frequency and speed of changing laws, no guarantee is made as to the current validity or applicability of the information contained herein. Though we try to update information often, we recommend that readers with questions investigate current law or contact TLGNWA directly through our contact form or by calling (479) 334-3411.