How many times have we engaged with other businesses and we sign a contract without thinking about it. Everyone understands that buying a house or even buying a car involves signing a contract, but what about taking your car for repair, a gym membership, a subscription service? Pretty much any transaction where you give something and get something can be a contract.
So just what is a “contract”? A contract is an agreement where both parties must give something and get something. A contract does not have to be in writing. Contracts can be verbal, but certain types of contracts, such those involving real property must be in writing.
So what makes a contract? First, there must be a meeting of the minds, that is the agreement. If there was a meeting of the minds, even if not written down, it can still be a good and valid contract. In some cases, if the meeting of the minds was different from what got written down or signed, what you agreed to may still be the right contract. Second, there must be consideration. What is consideration? Consideration in contracts is a legal concept. It is the value each party must get in the contract. Lets say there are two parties A & B. A promises to do something, but B makes no promise to do anything, A has just made an empty promise without a consideration, and there is no contract. Now if B relied on that promise, there are other equitable theories for B to recover, but B has no contract!
Contracts are a “civil” matter usually, but if someone is fraudulently inducing contracts, there can be criminal implications. As a civil matter the damages usually (and thus the recovery) is monetary. What if the contract was for a painting, or a performance? There is a concept of enforcing “specific performance” where the party obligated must do exactly what they promised to do. They cannot return money instead. Usually specific performance involves things that are considered “unique” and their translation to money is very subjective. Examples include work of art, or land transactions.
In a business world, there are many different contracts that get passed around as forms. A membership form is usually a contract. A purchase order is a contract. Sometimes, cashing a check can create a contract…Remember getting those SPAM checks in mail, where some company is just giving you money as a check? Usually, written on the check is that by cashing this check you agree to ….and that creates a contract!
Do you have a contract problem? Call our office for more information.