Contracts are essential to protecting the interests of multiple parties when they exchange goods, property, and services. However, it can be tough to identify the most important parts of a contract due to the high volume of legalese many contain. Today, we’ll get a glance at the three basic elements that make a contract legally binding – without a lot of legal jargon.
- The Offer.
If you’re the person drawing up the contract, the first thing that must be included is your offer. This offer usually takes into account discussions and verbal agreements the parties have had prior.
Your offer should be as detailed as possible. Let’s say you’re selling your car to someone else. You say that you’ll sell it to the other party for $4,000. The other party only wants to pay $3,500, but will agree to pay the full $4,000 if you take care of a few repairs. If you decide to take the $3,500 instead, your offer will state that the new owner is responsible for any repairs it currently needs.
In other words, it should be clear that the sale price is for the vehicle as-is.
- Acceptance of Said Offer.
If all parties aren’t in agreement, the sale isn’t going to go through, and the contract would be essentially worthless. This is usually the stickiest part of drawing up a legally binding contract.
Coming to an agreement that informs the acceptance of a contract may involve adjustments in terms of the offer, as we imagined with the prospective counteroffer of $4,000 on a repaired vehicle. It is up to you to accept or reject counteroffers with the understanding that either can change the terms of the offer in the original contract.
The way in which the offer is accepted is vital to legally binding acceptance. Contracts should specify a time period in which acceptance should take place in order for the offer to be valid. You may decide that the other party should submit their acceptance in writing or verbally by a certain date.
If you’re a little unclear on the risk involved with your contract, it may be helpful to have those at https://equifyllc.com/equifyinsuranceservices take a look. But until then, know that the third and final necessary element is consideration. In fact, you shouldn’t even begin until you can identify where the consideration might be.
Consideration in a contract is the exchange of one thing for another. In the case of a sold vehicle, you are exchanging a vehicle for money. Consideration isn’t restricted to money, it can also be action, lack of action, or services performed. Simply put, everyone must gain something from the contract, or it isn’t a contract.
Want to protect yourself with a legally binding contract? Then you must make a detailed offer, ensure and demonstrate that it’s been accepted by another party, and show where the mutual benefit is. That’s right – in the end, legally binding contracts don’t require a bunch of verbiage that only a few can understand. It’s two consenting parties who are on the same page about what they’re exchanging.