Three Key Elements to the Creation of a Contract
If you are entering into any sort of agreement with an individual, and money, products, or services are changing hands, it is a good idea for you to write a contract. A legal contract will protect you both, by outlining your obligations. If anything goes wrong, you will have something that you can take to court to help you receive adequate compensation. Receiving what you deserve is much easier if you have a contract. However, not all contracts written by two parties are legally binding. In order to have a legally binding contract, you need three basic elements to be present in the document. You need competent parties, compensation, and a meeting of the minds in order to have a legally binding contract.
The first key element to the creation of a contract is that both parties must be of sound mind, and they must be legally able to enter into a contract. Minors cannot enter into most contracts without parental consent. However, minors can independently enter into contractual agreements for basic necessities, such as food, clothing, and shelter. Minors can also sign contracts for student loans. Individuals under the influence of drugs or alcohol cannot enter a contract. Also, individuals who suffer from a mental illness that prevents them from making rational decisions cannot enter a legally binding contract.
The second major aspect of a contract is compensation. Compensation refers to both the payment made and the service or product received. You cannot have a binding contract that requires one or both parties to commit an illegal action. If you hire a hit man, have him sign a contract or enter a verbal agreement, and he fails to perform the murderous task you specified, you cannot take him to court for breach of contract. You also cannot have a valid contract where the compensation is an illegal item, such as drugs or stolen merchandise. For the contract to be valid, both parties must receive some sort of compensation. There cannot be a valid contract wherein only one person receives money or services. The compensation must be reasonably equitable as well, in order for the contract to be upheld in a court of law.
The third major aspect of a contract is a meeting of the minds. Both parties must fully understand the agreement. One way to ensure that a true meeting of the minds has been accomplished is to put as many details as possible into the contract. For example, if you are trying to sell a car, describe it in minute detail. This will prevent your buyer from protesting that they thought they were buying a car in a different color or with fewer miles. Details will help strengthen your contractual agreement.
Contract law is a complicated and complex legal area. Legal scholars spend years studying its intricacies. Although these are three of the basic elements of a legally binding contract, other factors can come into play. If you have any legal questions about your contract, consult a lawyer.