Many books have been written on contracts. What contracts mean, how they apply, what happens if they are unclear, etc. Without going into all the details, we thought we would just touch on some of the high points.
Black’s Law Dictionary defines a contract as “A promissory agreement between two or more persons that creates, modifies, or destroys a legal relation.”; “An agreement, upon sufficient consideration, to do or not to do a particular thing.”
Basically, what that means is a contract is an agreement between parties.
The parties can be people or entities (like an LLC or a corporation) that are competent and have sufficient capacity to enter into an agreement. For example, if it is a person, they must be at least 18 years of age (be of majority) and be of sound mind.
It requires that there be an offer, and an acceptance of the terms, and that both parties receive some benefit (which is what lawyers call “consideration”). The benefit could be immediate, or it may be a promise of something in the future. For example, “I promise to pay you $35 if you promise to mow my yard next week”.
A contract can be oral (verbal) or written. A written contract is much easier to prove, and in some cases, for example the sale of real estate, must be in writing to be enforceable.
We recommend that if it is important enough that you would want to enforce it later on, put it in writing. A written contract is a document that keeps folks honest. It puts down what each party agrees to do, and doesn’t rely on peoples’ recollection of what they thought the other side was supposed to do or not do.
With very few exceptions, you are bound by the contract immediately. You don’t have 72 hours to change your mind.
You are bound by the terms of a contract that you sign, whether you read it or not, and whether you understand it or not. We recommend that you always read any contract that you are going to sign. If you do not understand it, or don’t know what the potential consequences are, you should seek the advice of an attorney before you sign.