Courtesy of Traskbritt Patents
There was a time when much business was conducted based on a handshake and the word of the parties involved. And although for the most part verbal contracts can be legally binding, business today is characterized by a seemingly endless mountain of paperwork all binding the business owner to some legal obligation or another. If you’re new to business or contemplating a venture as an entrepreneur, there are some basics of business contract law you should know.
Essentials of a Legal Contract
Although there are many variations in the details, all valid contracts require:
- Offer, acceptance and mutual consent – Implicit in understanding these concepts is that the parties are serious in their attempt to reach an agreement. There may be many discussions and side conversations, but ultimately, there must be a specific offer and a specific acceptance. Mutuality means that both parties must be acting of their own free will as they proceed to an agreement.
- Consideration – This can be a difficult concept for many neophytes to contract formation, but each party must obligate themselves to surrender something of value in entering into the contract.
- Legal purpose – A contract cannot be made for illegal purposes.
- Competency of the Parties – A person who is under age or mentally unfit may not enter into a legally binding agreement.
In the real world, many contracts are formed for one of the reasons above, or for any other numerous issues, may not be enforceable. That only becomes an issue if either party seeks legal counsel or otherwise seeks to enforce the terms. Many “contracts” that are voidable become the standard by which parties conduct business. It is not illegal to enter into an invalid contract.
Pacta Sunt Servanda
This is a Latin term, which essentially means that the terms of a contract must be kept. More of a principle of law than an enforceable standard, it suggests a good faith, perhaps moral, obligation to fulfill the terms of an agreement made with another party acting similarly.
There are many instances when a business owner when will find him or herself in need of a lawyer to protect or enforce important rights. But if you approach your business with a desire to act above-board and honestly with those you come in contact with, you may find yourself spending a lot less on attorney fees.
If you’re just getting started in the industry, make sure you are starting with the right foot forward. If you’re in need of business services such as an electronic store system, computer hardware, business branding like logos, business cards, etc., and more, then make sure to check out our services section! We’ll set you and your business up for a great future!