The Law Of Contracts

Virtually every business transaction is carried out by means of a contract, a mutual agreement between two or more parties that can be enforced in a court if one party chooses not to comply with the terms of the contract. If you rent an apartment or house, for example, your lease is a contract. If you have borrowed money under a student loan program, you have a contractual agreement to repay the money. Many aspects of contract law are covered under the Uniform Commercial Code.

A "handshake deal" is in most cases as fully and completely binding as a written, signed contract agreement. Indeed, many oil-drilling and construction contractors have for years agreed to take on projects on the basis of such handshake deals. However, individual states require that some contracts be in writing to be enforceable. Most states require that at least some of the following contracts be in writing:

Contracts involving the sale of land or an interest of land

Contracts to pay somebody else's debt.

Contracts that cannot be fulfilled within one year

Contracts for the sale of goods that cost more than $500 (required by the Uniform Commercial Code).

Only those contracts that meet certain requirements-called elements- are enforceable by the courts. A person or business seeking to enforce a contract must show that it contains the following elements: voluntary agreement, consideration, contractual capacity of the parties, and legality.

For any agreement to be considered a legal contract, all persons involved must agree to be bound by the terms of the contract. Voluntary agreement typically comes about when one party makes an offer and the other accepts. If both the offer and the acceptance are freely, voluntarily, and knowingly made, the acceptance forms the basis for the contract. If, however, either the offer or the acceptance are the result of fraud or force, the individual or organization subject tot eh fraud or force can void, or invalidate, the resulting agreement or receive compensation for damages.