Contracts 101
Contracts are Legal Binding Agreements
Contracts can occur in almost every aspect of our lives – personal and professional. Most people sign contracts and many times do not even read them (scary situation). Contracts can seem daunting and unfamiliar. Let’s try to break down some basics on contracts.
What is a contract? A contract is a legally binding agreement made between two or more parties. A contract must meet several requirements to be enforceable by a court of law. In New York, if there is offer and acceptance, consideration, an intent to be bound and mutual approval, a contract is binding. You may ask what each of these parts are and here is a quick definition and/or example:
Offer and Acceptance
You must have a clear or definite offer. Example, “do you want to buy this desk?” and an unqualified acceptance “yes I do want to buy the desk”. Without these offer and acceptance, there is no enforceable contract.
Consideration
Each party has to promise or provide something of value to the other. Without such exchange, the contract is not enforceable.
Intent to be Bound
All parties to the contract must be capable and intend to be bound by the terms of the contract. The parties must understand what they are doing or signing and must intend to be bound by the agreement.
Mutual Assent
Parties must agree to the essential terms of the contract.
Contracts can be written or oral. A contract does not always have to be written to be enforceable in New York. If the requirements above are met verbally, a contract may be created.
There are many terms and conditions that can be written into contracts and it is important to read them and have a basic understanding. Some common phrases that may appear in contracts are:
Attorney’s fees and in the event of a legal dispute, who must pay the winning parties attorney’s fees.
Arbitration – Any dispute that arises about the contract must be resolved by arbitration and not through lawsuit. Arbitration is where a private party (non-party to the contract) can make the decision about the dispute. There is binding and non-binding arbitration. There is also mediation which is more of neutral third party who helps to resolve the dispute.
Jurisdiction – In the event of a dispute, this provision determines which state’s rules will be applied to the lawsuit.
Waiver – this allows the parties to give up their rights to sue for breach of a particular provision of contract.
Severability – This permits a court to take out an invalid provision and still keep the rest of the agreement intact.
Damages clause – there may be a cap on damages or there may be a limit on the type of damages that may be awarded in a dispute between the parties of the contract.
Confidentiality – This guarantees that the parties will not disclose specific information in the contract.
While contracts can arise in many different aspects of life, it is always important to read and understand what you are signing. If there is a question as to a provision in the contract or whether you should be signing the contract, you may want to consult an attorney to review the contract and speak to you regarding your rights if a dispute does arise from the contract.
Disclaimer: This article is intended to be educational and is not intended to be legal advice, which can only be given after an attorney-client relationship is established.
Please contact Trainor Law PLLC at our Malta, NY office at (518)-899-9200 or through our website at this link if you require legal assistance.
