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FAQ About Contracts

At least once in your life, you will be required to sign some type of contract. Whether you are starting a new job, purchasing a home, or entering a business partnership contracts are always involved. Before you offer over your signature on a contract it is of extreme importance that you throughly read through the contract and understand the agreement presented. Listed below are the most frequently asked questions concerning contracts

1. What is contract?

A contract is an agreement between two parties that requires them to do or not do a specified thing. Contracts can be drawn up between individuals, partnerships, and corporations. Both parties enter the agreement voluntarily and agree to honor all the conditions outlined.

2. What are the elements of a contract?

A contract must contain four elements for it to be legally binding.

  • An offer-these are the outlined conditions one party or both parties agrees to honor. A contract should clearly outline all conditions and requirements to eliminate ambiguity and confusion.
  • Consideration-the consideration is something of value that compels both parties to enter the contract. The thing of value can take a number of forms; it may be money or an agreement to complete a task or service.
  • Acceptance-the offer must be accepted. An offer can be accepted in a number of ways. Actual words or completion of the conditions outlined in the contract are all considered forms of acceptance. If an acceptance does not take place, a counteroffer may be presented. If a counteroffer is not made then this is considered a rejection of the agreement.
  • Mutuality- Both parties involved must have a meeting of the minds. A meeting of the minds assumes that both parties understand and agree on the conditions of the contract.

3. Is an agreement the same thing as a contract?

No, an agreement is not the same thing as a contract. An agreement is one part of a contract. Agreements do not include other elements of a contract.

4. What is a counteroffer?

A counteroffer are new conditions presented by one party. A counteroffer is usually made when one party does not agree with the initial conditions outlined in the contract. When a counter offer is presented the original offer becomes void.

5. What happens if I don't read and just sign?

You are still legally bound to a contract if you fail to read before signing. It is assumed that both parties take the necessary precautions prior to signing a contract. Even if you do not understand the contract, it is your responsibility to seek and obtain some type of explanation of the legal terms and conditions. An exception to this is if the other party has knowledge that the signer is unable to read or has a limited education level that would prevent them from understanding the contract.