These days, it is not good business practice to rely on handshake deals. When any amount of money, work or prestige is at stake, it is generally a good idea to formalize the agreement in a written contract. A contract in writing can avoid most disputes that can turn into litigation.
People new to the business world likely already suspected this, but may be unsure what a strong, virtually bulletproof contract looks like. In this post, we will discuss what should be part of a business contract that will hold up in court.
Under the law, a contract is usually valid when it contains the following elements:
- Intent by both parties to make a contract
- Legal subject matter (i.e., no criminal activity)
- An offer by one party, and acceptance of that offer by the other party
- Something of value promised in exchange for the offer
Acceptance of an offer must be unambiguous. A counteroffer is not acceptance, and so no contract is made when a party makes a counteroffer. Say you offer to buy someone's lawnmower for $100, and she says you can have it for $115. Until the two of you agree on a price, there is no contract.
Another reason a contract may be defeated is if there is nothing given in exchange for the offer. The legal term for this is "consideration." Consideration must be something of value, like money, goods or services, all of which are the typical terms of a business contract.
Besides these basic elements, business representatives can be fairly creative when negotiating a contract, so long as their tactics do not violate the law.