12 Days of Contracts – Day 2 – Elements of a Contract

On the second day of Christmas, my client gave to me, 2 year term… (Mel’s Remix)

In honor of the holidays, I’d like to share a few tips with you to make sure you go into the new year with new knowledge. Instead of the 12 Days of Christmas, I present to you — The 12 Days of Contracts! Yes, I’m a legal nerd!

In these 12 days, I will share some contract basics, so you can be more informed on terminology and what a proper contract needs to contain to make it valid and enforceable.

IF YOU MISSED IT, SEE DAY 1 HERE

“A verbal contract is not worth the paper it is written on.”

Sam Goldwyn (Film mogul)

Tip: Get it in writing! ALWAYS!

First, let’s start here: A contract needs to BE IN WRITING! Contracts are how you get paid and stay protected. Full stop.

I know what you’ve heard about oral contracts. While some states (not all) allow oral contracts, it is NOT best business practice to have oral contracts. On the other hand, under federal and state law, some contracts are REQUIRED to be in writing. Always, always, always get it in writing.

Email is just the beginning. An agreement should be written in some form and signed by all the parties. Memos, letters, and formal contracts all suffice. The world does not operate on handshake business anymore!

Elements of a Valid and Enforceable Contract

This is a high level overview, so there’s definitely a bit more that goes into this information. But here’s a quick Contracts 101.

There needs to be essential elements of a contract for it to be legally binding and enforceable. Offer + Acceptance + Consideration = Contract. It also includes obligations of the parties.

The offer is something, a good or service, that is requested by one party, or in other words, the promise to do something in exchange for action from the other party. The acceptance is when the other party clearly communicates and agrees to the terms to provide the good/service. The consideration is the “bargain” between the parties, and does not necessarily mean money, but is the agreed time, delivery, and fee for the good/service. Consideration can be anything of value exchanged. When there is consideration, that is what makes it different from a gift.

Offer + Acceptance + Consideration = Contract.

Never believe a party that says “We don’t need to add that in”. If it doesn’t match your understanding and what you have agreed to, it needs to be added in!

Questions to ask:

• 1) Have we reached an agreement? If you proposed the agreement, did you make your terms clear and did the other party agree to these terms? If you received an agreement, does this agreement match what you accepted to do?
• 2) Does this match my understanding of what was discussed? If not, bring it up, talk it through, negotiate it in. You get what you ASK for, not what you WISH for.
• 3) What is the exchange in this contract? Is there money being exchanged? Is it something of value? No consideration, no contract. Without consideration, it is a gift.
• 4) Have we made this agreement in writing outside of an email? Have we made a letter, memo, or formal written contract that has been signed by all parties? Congrats! You have a contract!

Contracts are important! Don’t shortchange yourself when it comes to protecting yourself, your business, and your assets!

*Disclaimer: This post is for informational purposes only and does not constitute legal advice. An attorney client relationship is not formed until there is a signed fee agreement*