Do we have a contract?

Contracts are the backbone of business relationships. Business owners have contracts with partners, employees, vendors and sometimes customers. And these agreements are the tools that define expectations, establish rules for the relationship and protect parties from certain types of conduct.

If a party breaches a contract -- or is accused of breaching a contract -- there can be hefty penalties. One of the first steps to resolving these matters is to establish that there is a valid contact in place to begin with.

Is it in writing?

Not every contract must be in writing to be valid. However, as explained in this article, certain contracts must be in writing. According to the statute of frauds, this includes:

  • Contracts for the sale of land
  • Contracts that cannot be performed within one year
  • Contracts for purchases over $5,000

However, if this statute of frauds does not apply to the contract in question, it can be an oral agreement and still be valid. That said, having an agreement in writing can be the best way to establish clear terms and prevent confusion or disputes.

Is it a valid contract?

Valid contracts must fulfill a number of different requirements to be enforceable. These four elements are as follows.

  1. There must be an offer, or a promise to do or not do something specific.
  2. There must be something valuable exchanged for the promise, or consideration. This could be money, a job, or performance of a service. This exchange distinguishes a contract from a gift.
  3. Parties must accept the offer. 
  4. Parties must understand and agree to the terms of the contract and its substance.

Based on these factors, parties should be able to determine whether a valid, enforceable contract exists. If it does, then parties must comply with the terms of it or face the penalties of breaching the contract.

If you are accused of breaching a contract or want to enforce a contract another party has breached, then there is a lot on the line and various resolutions to consider. To examine all the options available in these complex situations, securing legal counsel can be crucial.

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