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What makes a contract valid?

On Behalf of | Mar 11, 2019 | Business Law & Civil Litigation |

Contracts are the building blocks of every successful business relationship. They clarify expectations and avoid misunderstandings.

However, what exactly does it take to make a legally binding contract? Does it require a lot of big words and complex clauses in order to pass muster?

Not at all. In fact, unnecessarily complicated clauses and wording can often backfire — creating gaps in meaning and sowing confusion among the parties involved. Here’s what it really takes to make a contract workable and valid:

1. An agreement between two or more parties has to occur.

In order for a contract to exist, there needs to be a “meeting of the minds” between the parties involved on all important issues.

2. There needs to be an offer and acceptance.

A contract doesn’t officially exist until one party makes the other an offer and the other party accepts. That offer and acceptance are usually (but not always) in writing.

It’s important to understand that some offers can be revoked before an acceptance is given, some are conditional and some come with expiration dates attached that give the party on the receiving end only a limited time to consider his or her options.

3. Something of value has to be exchanged to seal the deal.

This is called consideration. The consideration in a contract could amount to something with actual physical value, like a sum of money — or it could be something that has value only to the parties involved, like a promise. Whatever it is, both parties have to receive something they value in exchange for the agreement in order for a contract to be enforceable.

Unfortunately, a poorly crafted contract can be the source of a lot of conflicts. When that happens, take the necessary steps to protect your interests by consulting with an attorney who is experienced in business law and civil litigation.


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