What Makes a Contract?

Posted by Michael E. Lyons | Feb 22, 2019 | 0 Comments

Making contracts, whether orally or in writing, can be confusing. Whether you're accepting a job or signing a lease, insuring a service or buying a car — if there's a promise to be made that involves the exchange of goods and services, a legally binding contract likely comes with it.

What is a “contract”?

According to the Wex Legal Dictionary, a contract is defined as, “An agreement between private parties creating mutual obligations enforceable by law.” In order for a contract to be legally enforceable, it must include, “mutual assent, expressed by a valid offer and acceptance; adequate consideration; capacity; and legality.”

What makes a contract legally binding or enforceable?

When you enter into a contract, there are three main criteria for it to stand up as a legally binding agreement: an offer, mutual acceptance, and proper consideration. The offer is the proposed term of the agreement (i.e. what good or service will be provided in exchange for a stated price). A contract has mutual acceptance when both parties agree to the terms —when the contract is signed, for example.  Lastly, even though signed, the contract only becomes enforceable if consideration is paid or promised.  Consideration is the actual payment of something of value or a binding promise to do (or not do) what is required under the terms of the contract.

Does a contract have to be on paper to be legally binding or enforceable?

The short answer? Maybe. A contract can be written or oral — meaning, if the criteria above have been met, something as simple as a conversation can be considered a legally binding contract and enforced as such in a court of law; however, certain contracts must be in writing to be enforced (i.e. contracts concerning the transfer of real property).

What does this mean?

Let's say you run a photography business and are signing a new client. You agree to take photos at your client's wedding for $200 an hour. Your client agrees, and you write up a contract, which both you and the other party sign.

In this case, your offer would be to provide time and effort spent taking photographs at your client's wedding in exchange for $200 per hour. The consideration is your binding commitment to appear during the event and take photos. The acceptance comes when you both agree to be bound by these terms by signing the contract. You've accepted your responsibility to provide your service, and your client has accepted theirs to pay your fee in exchange.

What qualifies as a “breach of contract”?

A contract is breached when one party doesn't hold up their end of the agreement. Think of it like breaking a promise — if you've accepted an offer with proper consideration but you don't perform the promised service, or deliver the promised consideration, then you've breached the contract.

In our photography example, let's say the big day rolls around and you spend four hours taking pictures. After the wedding, you send the photos to your client as agreed, but the client refuses to pay unless you edit their misbehaving uncle out of the family photos. Photo editing wasn't strictly outlined in your written contract, but your client claims that you offered touch-ups for free when you were confirming the schedule on the phone. Can your client legally withhold your payment?

This is when it might be good to consult with a lawyer.  Every contract dispute will be unique to the circumstances of the contract. There is no easy answer to a contract dispute. Most states have adopted the Uniform Commercial Code governing contract law, but you should still find an experienced attorney licensed in your state if you become involved in a contract dispute. An experienced contract law attorney can get you the remedy you want in a court of law, whether that is performance of the contract, compensatory damages, or restitution you might not even realize you are entitled to.

There are also situations when a contract is not enforceable which is different from a breach of contract. In these situations the contract cannot be enforced if fraud or misrepresentation is involved, or there is legal incapacity (i.e. minors), or unconscionability, or if it's an illegal contract in the first place. These situations will require you to understand the law and be able to prove the elements why the contract is not enforceable.

What if I'm in the military — are my contracts still legally binding if I am unexpectedly deployed?

Special considerations can be given to active duty servicemembers — and their dependents — when it comes to contractual obligations. If you are a servicemember, think of the last time you were called to active deployment — was it difficult to terminate your lease? Did you have to jump through endless hoops to start or stop your utilities payments? Have you heard of the Servicemembers Civil Relief Act?

Under The Servicemembers Civil Relief Act (SCRA):

If a servicemember fails to perform an obligation arising under a contract and a penalty is incurred arising from that nonperformance, a court may reduce or waive the fine or penalty if—

(1) the servicemember was in military service at the time the fine or penalty was incurred; and

(2) the ability of the servicemember to perform the obligation was materially affected by such military service.

This means that any penalties caused by a breach of contract — such as breaking a lease agreement early — can be waived or reduced if your military service was what caused you to break your contract.

It's important to note: SCRA is not a “get out of jail free” card for servicemembers, and exactly what constitutes a breach of contract — or a legally binding agreement in the first place — can be complicated. No matter your military status, if you've found yourself in the middle of a contract dispute, you need a qualified attorney to help you settle your case.

The lawyers at Patriots Law Group know and understand contract law and will use their experience and knowledge as a shield to protect you and your family from unfair damages (and lost security deposits). If you formed a contract in Virginia, Maryland, or Washington D.C.  call today to see how we can help you.

DISCLAIMER:  The information above is for general informational purposes only.  No attorney-client relationship is intended or created by this information.  Each individual situation is different and therefore a formal in-person consultation is necessary before any specific advice may be relied upon as appropriate and accurate for a given situation. Please call Patriots Law Group at 301-952-9000 to set up a consultation if you wish to obtain specific legal advice you may rely upon. We serve clients anywhere in the world, with in-person consultations available at our Suitland, MD office — right next to Andrews Air Force Base — for clients in Maryland, Virginia, and Washington, D.C. 

About the Author

Michael E. Lyons

“As a veteran, I bring my core values of service, integrity, and excellence to every client, every case, every time.” Background: Michael E. Lyons (“Mike”) handles cases in Maryland and Washington D.C. fr...


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