Business Contract Elements

Elements of a business contract are often vague. As an entrepreneur, you enter into countless types of business contracts throughout your career. This is not a 1950’s western movie and smart business strategy requires much more than a handshake. Learn the basics of a legally binding contract and save yourself lots of headache and maybe lots of money. Ignore these rules and risk losing everything you’ve created. The common answer from every lawyer answering every legal question is: “it depends”. The situations are endless and the rules are vague. Understanding the fundamentals will help you be more aware of how to make proper and more binding agreements. The legally binding contract generally has five elements.
  1. An offer is made.
  2. Both parties give consideration and are competent to do so.
  3. Voluntary acceptance of that offer is executed.
  4. The agreement is over a legal act.
  5. Proper formation of the agreement is created.
This list does not always need to be executed in the order listed above. There is a specific definition of an offer. In general, it means that you extend your commitment to do something or sell something to another person. That offer can be oral or written. The offer is the foundation of the contract but it is not binding before the rest of the conditions are met.
The term consideration plays a major part in this process. The definition of consideration in legally binding contract terms means that something of value changes hands. All parties must be competent. In common language, that means every person must know what they are getting into. Nothing illegal is binding in a contract. There are also certain criteria for items over $500, real estate, and more. Consult a competent and honest lawyer for full details. If you find an honest and competent lawyer, please let me know! This set of letters may help you remember the basics before signing over your retirement fund on lawyer fees: OACL. Offer, Acceptance, Consideration, Legal. Read more about contract law at Findlaw.com. Blog image provided by © Conejota | Dreamstime.com – Contract and Business Plan  
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