What is a contract?
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UPDATED: Feb 20, 2013
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A contract is an agreement between two or more persons (individuals, businesses, organizations, or government agencies) to do, or to refrain from doing, a particular thing in exchange for something of value. Contracts can generally be written using formal or informal terms, or they can be entirely verbal. If one side fails to live up to his/her/its part of the contract, there’s a “breach” of contract and certain remedies for solving the differences are available. The terms of the contract, meaning, the who, what, where, when, and how of the agreement, define the binding promises of each party to the contract.
Contracts are considered valid the moment that the offer is accepted. For example, if you shake hands and agree to purchase someone’s old TV for $30, you have a valid contract. The contract is complete when you give them the money and they give you the TV. Contracts can be as informal or as formal as the occasion calls for. Although, if you are making a deal for anything that is worth more than $500, it is usually a good idea to have something in writing, just in case something goes wrong with the agreement.
Written contracts must contain the names of both parties, the agreed upon terms, and the parties’ signatures to be valid. An example of a valid contract is: “Luke Luck hereby agrees to sell Ducky Lucky 400 meal worms. Ducky Lucky agrees to pay $20 for the meal worms.
Luke Luck’s Signature and Date
Ducky Lucky’s Signature and Date”
If you are trying to draft a form contract for your business, it would be in your best interest to have a business attorney look over the finished draft. A business attorney can offer feedback as to provisions that can protect both the buyer and seller and ensure that any disputes over contract agreements remain out of court.