Many legal terms cover every letter in the alphabet, especially when it comes to contracts. There are many steps that you need to know when it comes to developing or signing a contract. There are a few key terms our lawyers believe the average person should learn more about. Here are our ABCs of contracts.
What Contracts Are Used For?
Contracts are legally binding agreements that are used for rentals, purchases, business transactions, meetings, property protection, or completion of a service. There are many reasons that someone may ask you to sign a contract, including to protect you or the other person from legal repercussions. A contract can be a written document or a verbal agreement.
The ABCs Of A Contract
There are many components of a contract, which can vary depending on what type of contract you are dealing with. The ABCs of contracts are crucial to help both parties avoid potential issues.
Agreement (Offer And Acceptance)
The contract starts with an offer from one party. This could be an offer for a service, a behavioral adjustment, or a request for payment. The offer is presented to the other party and they must either accept or reject the offer. Acceptance can be verbal or written. Without this crucial first exchange, a contract does not exist.
Consideration
This is the value that each person agrees to exchange. Money, goods, services, or a promise can all be a consideration. In order for a contract to work, both parties must bring value to the table.
Capacity
For a contract to be enforced, the parties must be able to enter into it. Having the capacity to enter into a contract refers to being of legal age, having the mental competency to understand the words of the contract, and having verbal or written acceptance of the terms. Capacity will ensure that a contract does not take advantage of either party.
Legal Purpose
A contract is only enforceable if it has a legal purpose. The contract can not include illegal activities or violations of public policy or it will be void in the eyes of the law.
Other Key Terms To Know
There will be a lot of different language in your contract. Working to learn more about legal jargon can help improve the proceedings that follow a contractual agreement. Here are some terms you should know before signing a contract.
- Term: Duration of a contract or how long the agreement is valid.
- Termination Clause: Outlines conditions that will occur if the contract is ended before the term is completed.
- Confidentiality Clause: Restricts parties from sharing private information that shouldn’t be disclosed except under special circumstances.
- Indemnity Clause: Shifts the potential costs and damages from one party to the other, used to limit liability on just one party.
- Jurisdiction: The legal authority that will handle disputes over the contract or if a breach were to occur. This is specified by region or state.
- Arbitration: An additional method of dispute resolution where a third party will help two people reach an agreement. Arbitration can end in a contract in which both parties help to develop and feel good about the terms.
- Bona Fide: Meaning good faith, bona fide implies trust for each party to go through with the contract agreements. Both parties will act with honesty and filter out hidden motives.
- Liability: The legal obligation of a person to stick to the contract or provide compensation so that no harm is done.
- Risk Of Loss: This will outline the responsibility of either party for covering damages or money if the contract is breached. If a seller can’t complete the sale, they will need to provide substitute goods or other compensation for the other party. Many risk of loss instances are covered with insurance.
- Waiver: Intentional surrendering of rights by one party to the contract. Some contracts will have a no waiver clause which means no provisions will be provided if the contract is waived.
Contract Help From WW Partners
Our legal team can help you form a contract, handle contract disputes, and understand legal terms. WW Partners understands common law and statutory law, which both govern contracts in the United States. A well-developed contract will facilitate trust between two parties and ensure that they both get value out of an agreement. Everyday transactions or business deals are handled through legal contracts. Work with our trusted legal partners to ensure you get the most out of your dealings. Contact us or visit our Salt Lake City office today!