The Basics of a Contract
Contracts can be long, boring, and very confusing. Understanding the parts of a contract will hopefully help you in any present or future agreements. To start, you should know about the three main components that make up a contract: offer, acceptance, and consideration.
An “offer” constitutes an expression of interest in entering a contract. When an offer is made, it should be understood by both parties that upon acceptance of the terms, the offer is considered binding. For example, an offer can be as simple as a person writing a price on a for sale sign and placing it on their vehicle. Or, it can be complex in that it has many terms, like an employment contract, in which a person must satisfy all terms in the offer through the length of the contract. Importantly, once the offer is accepted, it is binding, no matter how simple or complex the offer is.
Once an offer is made it can be ignored, accepted, specifically rejected or rejected by submitting a counter-offer. As with the acceptance of an offer, the acceptance of a counter-offer creates a binding agreement of that new offer.
“Acceptance” is either a promise, or an act that indicates a person’s will to enter into a contract and be bound by the terms set forth in the offer. Acceptance can be tricky – especially when it is done through an act, such as verbal communication, accepting funds, or even a handshake. However, acceptance is most closely associated with signing a document of the agreed upon terms.
The third and final part of a contact is “consideration.” Consideration is a legal term for exchanging something of value. Whether it be money, products, services, consideration is something of value that each party exchanges. For example, an employee provides his or her time and skill for an employer, who, in exchange, provides compensation. It has long been said, that the exchange of consideration can be as little as a peppercorn seed as its of sufficient value.
While contracts can be extremely lengthy, complicated, and difficult to understand, only these three elements are required for one to be formed and legally binding. For any of your contract needs, both simple and complex, know that the business law attorneys at Sullivan, Krieger, Truong, Spagnola, and Klausner are more than happy to assist you. You can contact us at 1-877-877-1-LAW or fill out the form below to get in touch with us.