Common Contract Mistakes

Contract Mistakes

Don’t make assumptions about contracts. Mistakes can cost you and your business money, time, and energy. It’s best to understand what an enforceable contract is to maximize the agreement and prevent future problems as a breach of contract lawyer would advise you to do.

What Does A Contract Need?

Contract law is driven by state law, so what makes a contract binding or not may differ elsewhere. But generally, a valid contract must involve the following:

• • Legality: The subject of the contract must be legal. A contract to exchange stolen cars for heroin wouldn’t be legally enforceable
• • Capacity: The parties must be old enough to contract (generally 18) and understand the terms, rights, and obligations. If a party lacks capacity but agrees to an offer, the contract would be unenforceable
• • Offer: One party makes a promise to do or refrain from doing something in the future in exchange for something from the other party
• • Consideration: The contract involves the exchange of something of value. This could be a promise to do or not do something or exchange cash for a product or service. This consideration induces the parties to agree to the contract. Without consideration, what one party does for the other may be considered a gift, and the receiving party has no legal obligation to respond
• • Acceptance: The offer is unambiguously accepted. Acceptance could be words (written or verbal), deeds, or performance as specified in the contract. Acceptance must mirror the offer’s terms, or the attempted acceptance can be seen as a rejection and counteroffer
• • Mutuality: There’s “a meeting of the minds,” so both parties understand and agree to the contract’s substance and terms

If you understand these basics, you should be able to avoid basic, major mistakes that can make a contract unenforceable according to our friends at Focus Law LA.

Common Contract Mistakes

Here are some other issues you want to avoid when negotiating a contract:

• • A lack of clarity or precise language in the contract terms and conditions. Contracts should be clear and understandable to avoid confusion and future disputes. Clearly define the parties’ obligations, rights, and responsibilities. Ambiguous or vague language can lead to misunderstandings, misinterpretations, and conflict
• • Situations change, and part of the contract should include how it can be modified in the future 
• • Just because one party breaches a contract term doesn’t end the contract. There can be a minor breach regarding how or when something will be done, but the party can still substantially comply with the other terms. A material breach makes complying with the contract extremely difficult or practically impossible. You may be unhappy if the other party commits a minor breach, but if you don’t comply with your obligations, you’re materially breaching the contract. You could be liable to pay the other party enough to make them “whole” because of your breach, or a court may order you to comply with the contract
• • A contract could be created verbally or through actions by both parties, not just in writing. If all the contract requirements are met, it’s a contract. Written contracts are preferable for many reasons, but putting an agreement in writing isn’t necessary to be enforceable

If you’re considering entering a contract with another party, negotiating one, or are the subject of one you don’t understand or dislike, talk to a contract lawyer and get help. Straightening things out early can be a lot less trouble than coping with a contract dispute later on.