As a business owner, you almost certainly enter into contractual relationships every day. Several of you pander to written contracts on a fairly regular basis. But, do you perceive the essential ideas of contract law and what makes a legally binding contract? Do you know what to look for when reviewing contracts prepared by the other party, or your own attorney that make it a legally binding contract?
Beneath Wisconsin contract law, legally binding contracts, whether oral or written, need 3 basic parts: offer, acceptance, and consideration. An "supply" requires that one party offers to provide one thing of price to a different party, which is then "accepted" by that different party. "Thought" is what the two parties are obligated to exchange with each alternative as half of the contract. Thought should be something of value, and also the consideration should be mutual, i.e. both sides must provide one thing of value underneath the contract. For example, an agreement whereby a celebration agrees to pay you $1,000.00, without receiving something in exchange, is by definition not a contract.
Sometimes, thought takes the form of cash paid in exchange for the provision of products or services. This is true for multi-million greenback transactions between international conglomerates, and when you are taking your car in for repairs by a mechanic. One corporation agrees to pay scores of bucks for an additional corporation to develop specific software or some other product, and you pay your mechanic to exchange your spark plugs. In either case, there is an provide, acceptance, and consideration, and thus an enforceable and legally binding contract. Keep in mind, but, that legally binding contracts could require thought different than money, for example when 2 parties comply with exchange parcels of real estate.
Below Wisconsin contract law, all contracts additionally come with an implied duty of "sensible religion and truthful dealing" on the half of each parties to the contract. Whereas this can be admittedly a rather broad phrase, in essence it means that, once an agreement has been reached, each parties have an obligation to form affordable efforts to satisfy their respective obligations, and to avoid taking actions that will hinder the performance of the contract.
Parties to contracts have the proper to enforce them in courts of law. Usually, the remedies for breach of contract take one in all 2 forms, either specific performance or monetary damages. Specific performance is an equitable remedy most typically awarded in cases involving land transactions, and consists of the Court ordering the breaching party to meet its obligations, i.e. "specifically perform" the contract.
In most cases, the remedy for breach of contract is money damages, sometimes in the shape of "consequential" damages. Consequential damages are those damages that flow naturally from one party's breach of a contract, and will embrace the cost to replace a product that was never delivered, the price to repair a defective product, and any resulting lost profits. However, consequential damages should be "moderately foreseeable" at the time the contract was created in order to be recoverable.
With bound exceptions, oral contracts may be simply as valid and legally binding as a written contract. As an attorney, I advocate that whenever doable, contractual obligations be set forth in a very written document signed by both parties. As a general rule, courts are required to seem solely at the written contract itself to interpret the parties' obligations, unless there is some ambiguity within the contract. In the absence of a written agreement, or when an ambiguity exists in a written contract, the court could look to extrinsic proof, together with the testimony of the parties, to determine their intent. In different words, the judge or the jury can be determining the fate of the parties, versus the parties themselves. So, written contracts that clearly outline the obligations of the parties are almost invariably preferable to oral contracts.
I can shut with a suggestion. Never ignore the "boilerplate" language that you regularly notice at the end of contracts. While these provisions could appear like an afterthought added by the attorneys to form the contract longer, they are usually of very important importance, specifying among other things where written notices (for instance, terminating the contract) should be sent beneath the contract, to where a lawsuit should be filed and what jurisdiction's laws will govern the contract. While it is important to review the detailed provisions of the contract, it can be just as important to understand the "customary" provisions at the top of the contract.
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Adam has been writing articles online for nearly 2 years now. Not only does this author specialize in Wisconsin Contract Law - What Makes a Legally Binding Contract?
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