You’ve probably signed a contract without realizing it. Maybe you wanted to get the best deal on a new car, or maybe you were applying for a job. Whatever the case may be, knowing how to tell if a contract is valid and enforceable is essential for making sure that your rights are protected (and also for avoiding getting into situations where your rights are being trampled).
| Takeaways |
|---|
| – Understanding the key elements that make a contract valid. |
| – Recognizing factors that can render a contract invalid. |
| – Learning to assess legal capacity and mutual assent in contracts. |
| – Exploring the significance of consideration in contract validity. |
| – Knowing when written documentation is necessary for enforceability. |
Mutual Agreement
The most important question of all is whether or not the parties agreed to the terms of the contract. If you’re a farmer and I’m an apple farmer, we may have a contract that says: “I will sell apples to you for $10/pound.” We agree on this price and make sure it’s clear in our written agreement that we are selling apples at this price until next year.
If we say something else than what was stated in our written agreement, for example, if I tell my friend that I’ll sell him some apples for $5 each instead of $10 each then there’s no mutual agreement and therefore no valid contract between us.
Even if he pays me $5 per pound but then asks me why he only got five pounds when there were supposed to be ten pounds (because he read what was written in our signed agreement), he has no case against me because my promise wasn’t clear enough: You can’t sue someone who doesn’t know what they’re doing!
Writing a contract requires attention to detail, and avoiding common mistakes is crucial. Our guide on Writing a Contract: Top 11 Mistakes to Avoid provides valuable insights into crafting contracts that hold up.
Consideration
Consideration is the thing that changes a promise into a contract. Consideration is what agrees legal and enforceable. Consideration is also the key to making any contract valid or invalid.
If you want to know if a contract is valid, you need to ask yourself: did something change hands?
For example, if I told you not to tell anyone about this book and then promised money for your silence about it, my request would be considered consideration because there was an exchange of information for money.
If I just asked softly with no mention of payment at all, my request would not qualify as consideration because there was no exchange of anything valuable between us—just words on my part and nothing else from yours.
Contract Capacity
The first thing you should look at is whether or not the person who is signing your contract has the capacity to do so. Capacity can be defined as the ability to understand the situation and make decisions about it.
Most states have laws that require a person’s mental and physical health to be taken into account before they are allowed to enter into a contract.
For example, if you are 16 years old and want to sign a contract selling your cat on Craigslist, but you have difficulty reading and writing English and therefore cannot fully understand what the agreement entails then this could present problems with your ability to sign an enforceable contract.
If there is any question as to whether or not someone has the capacity (or fitness), then it’s best not to proceed with agreeing until those issues have been resolved.
When legal matters arise, finding the right representation is essential. Learn how to navigate this process with our article on How to Find a Lawyer When You Need One to ensure your legal needs are met effectively.
Competence
You may have heard the term “competent parties.” This refers to the fact that a valid contract must be made by competent persons. What does this mean? It means that you are not allowed to enter into agreements with minors or people who are mentally incapacitated. If you do, your contract will be invalid.
So what happens if you sign a contract with someone who is not mentally capable of understanding it? For example, if there was some sort of medical issue that prevented them from understanding what they were signing – would this void the agreement?
The answer is no; in such cases, courts usually find that any promises made by the incompetent party were involuntary and therefore unenforceable (meaning they can’t hold up in court).
Obligations And Promises
When it comes to contracts, you can think of obligations as promises that are enforceable. Promises, on the other hand, are not legally enforceable. (But if you make an obligation and promise to pay me $25 for doing some work for you, then I can force you to pay me.)
In other words:
- Obligations = Promises that are enforceable
- Promises = Obligations that are not enforceable
Written Document
As a contractor, you should know that a valid contract must be:
Signed by both parties. A written agreement signed by both the person offering services and receiving them is essential for establishing that each party has entered into a binding arrangement with the other.
This is especially important when making agreements with large companies or government entities, which may have legal counsel who will look over your contracts before signing them themselves.
In writing. Oral contracts are difficult to enforce because there’s no way to prove that they were agreed upon; having everything down on paper not only helps prevent disagreements later on but also makes it easier for you to remember what was agreed upon in case something happens before both sides sign off (like if one of you forgets).
Clear, legible, and unambiguous. While this one might seem like common sense you wouldn’t want anyone reading over a garbled mess of letters it’s worth keeping in mind anyway since misunderstandings can occur even among two individuals who speak the same language fluently!
There are no excuses here: if something doesn’t make sense after reading through once more then chances are good there’s an error somewhere that needs fixing before moving forward with negotiations.”
Effective contract writing is a skill every lawyer should master. Explore our comprehensive guide, How to Write Better Contracts: A Guide for Lawyers, to enhance your ability to create legally sound and clear agreements.
Electronic Documents
For an electronic document to be valid, it must meet the requirements of a written document. You can think of electronic documents as “written” documents that are not printed out on paper.
They are created using a computer or other digital device and may require signatures from both parties (just like regular paper contracts). If you’re unsure if your contract has met these requirements, ask yourself these questions:
- Is there an original copy?
- Can I prove this was signed? If so, how?
As long as the answers to these questions are yes, then it’s likely that your contract is legally binding.
If this is not true for your particular situation but you need help determining whether or not something was electronically signed in a way that makes them legally binding and able to be verified by third parties (such as courts), consult with an attorney who specializes in contract law instead!
Breach Of Contract Vs. Void Contract
The main difference between a breach of contract and a void contract has to do with whether there was an actual agreement. In other words, if the parties have a legally enforceable agreement, then they can be held accountable for failing to honor it.
However, if the contract never existed in the first place because of some legal defect or other reason, then it won’t be valid and no one will be held responsible for not following through on their obligations under it.
In practice, though there are many reasons why someone may argue that a contract is invalid or void (such as fraud), this decision ultimately depends on whether or not both parties agreed to create an enforceable legal relationship at all:
If so, then the party who breaks their promise may incur financial consequences; but if not and especially if there were serious concerns about whether or not any such agreement could ever take effect then any promises made would fail from lack of consideration (in other words: because nothing was given in exchange).
Unlawful Purpose
If you’re reading this, the contract you signed was likely for a lawful purpose. For example, if your employer hired you as an employee and then changed the terms of your employment without your consent or knowledge, that would be an unlawful purpose.
A common example of a lawful purpose is where one person agrees to give another person money in exchange for goods or services. In this case, both parties have agreed upon what they are going to do and how much money will change hands and there is nothing inherently wrong with this transaction (in most jurisdictions).
Excelling in legal writing is a crucial aspect of academic success. Dive into our resource, Top 12 Legal Writing Tips for Students Who Want to Succeed, to discover strategies that will elevate your legal writing skills and set you up for achievement.
Illegality (Statute of Frauds)
The Statute of Frauds is a law that requires certain types of contracts to be in writing. They are called “Statutory Contracts.” If you get into a contractual dispute with someone and the contract was not written down, the court won’t enforce it even if both parties say they agreed on terms.
In other words, even if there’s no question that the parties reached an agreement and intended to be bound by it if you try to enforce such an oral contract in court, your case will get thrown out as soon as someone points out how it violates this statute.
What Kinds Of Contracts Must Be Written?
There are several exceptions carved out from this rule: promises under seal (i.e., handwritten) aren’t covered; nor are agreements made during international commerce or maritime business; verbal promises that are part of government land grants; promises between husband and wife; and any other type of local laws which apply only where they’re passed (such as in California).
Legal Or Enforceable Terms
The first step to figuring out if a contract is enforceable is to see if it’s legal. This means that the terms of your contract are not in violation of state or federal laws and that they don’t violate any public policies (like laws against slavery). If a contract is illegal, then it won’t be valid and you can’t force someone else to follow it.
In addition to being legal, some other types of contracts may also not be enforceable:
- Contracts in violation of public policy aren’t valid because they’re against community standards or moral principles generally accepted by society.
- Contracts in violation of the law aren’t valid because they break existing rules set by legislatures.
Mistakes in legal writing can have significant consequences. Learn from the most common errors with our guide, Top 15 Most Common Legal Writing Mistakes and How to Avoid Them, and ensure your legal documents are accurate, clear, and professional.
If You Understand The Basics Of A Contract, You Can Avoid Getting Into A Contract That Isn’t Enforceable
If you understand the basics of a contract, you can avoid getting into a contract that isn’t enforceable. There are some things you can do to make sure a contract is enforceable. If you want to make sure a contract is enforceable, you should get a lawyer.
Make sure all parties have signed it. The person or business who writes the contract may be considered its author and can sign as such; however, everyone else involved must also sign it before it becomes valid and binding on them.
Check for spelling errors and grammatical mistakes. This makes all the difference in getting your point across correctly and could mean the difference between having your rights protected or having them trampled on by other parties’ bad legal advice!
Don’t worry too much about these details though–just check for anything glaringly obvious (like those two words being switched around). It’s better than nothing!
Conclusion
So now that you know the basics of a valid contract, it’s time to test your knowledge. We’ve compiled some sample contracts from various industries to help with this endeavor! There are three tests: one for a real-life contract, another for a hypothetical situation (using lawyerspeak), and finally one for what happens if things go wrong.
If your answer is correct: congratulations! If not well, you might need to spend some more time studying up on these guidelines before signing anything important yourself. Just don’t panic: as long as both parties understand what each other wants out of this agreement, there should be no problem at all.
Further Reading
What Makes a Contract Valid? Short Description: Explore the key elements that contribute to the validity of contracts and ensure your agreements are legally binding.
Enforceable vs. Valid Contracts Short Description: Understand the distinction between enforceable and valid contracts and how this impacts the legal obligations of parties involved.
How to Determine if a Contract Is Valid Short Description: Learn practical steps to assess the validity of contracts, including factors to consider and common pitfalls to avoid.
FAQs
What are the essential components of a valid contract?
A valid contract typically includes offer, acceptance, consideration, legal capacity, and mutual assent among the parties.
Can an enforceable contract be considered invalid?
Yes, while an enforceable contract may be legally binding, it could still be invalidated due to factors like fraud, duress, or misrepresentation.
How do I know if a contract lacks mutual assent?
A lack of mutual assent might occur if there’s a misunderstanding or disagreement about the terms and intentions of the parties involved.
What role does consideration play in contract validity?
Consideration refers to something of value exchanged between parties, indicating a bargained-for exchange, and is a crucial element in forming a valid contract.
Can a contract be valid even if it’s not in writing?
Yes, many contracts can be valid without being in writing, but some agreements, especially those involving real estate or certain goods, may require written documentation to be enforceable.
Costantine Edward is a digital marketing expert, freelance writer, and entrepreneur who helps people attain financial freedom. I’ve been working in marketing since I was 18 years old and have managed to build a successful career doing what I love.
