People enter into contracts every day. It may be as simple as buying a loaf of bread or as complex as selling a company. Understanding what a contract is and its legal obligations can protect both the buyer and seller.
A contract is a binding promise between two competent parties that is enforceable by law. To be a valid contract, the promise must include an exchange of something of value between the parties. Money is often part of the exchange, but not necessarily. The exchange cannot involve anything illegal.
By definition, a competent party in a contract is one who has maturity and mental health. Maturity usually means of legal age, 21 years old in Mississippi. While minors may enter into contracts, other conditions apply. The legal definition of mental illness, however, varies among the states and is more difficult to determine for contract purposes.
While oral contracts are valid, written contracts are safer because they outline all terms of the agreement. Be sure to include any spoken promise from the seller, a salesperson or agent in the written contract. A court considers a written, signed contract the final agreement and the basis for any dispute that may arise later.
The two basic parts of a contract is the offer and the acceptance. One party makes an offer to another party, who may or may not choose to accept. A valid offer includes the name of the accepting party, the subject of the offer, a quantity, and a price.
If the other party agrees to the offer, acceptance occurs and a contract is made. That acceptance can be made in writing or stated orally. Acceptance can also occur through action. A teenager, for example, could accept a neighbor's offer to pay the youth to mow his lawn by just going to the neighbor's and mowing his yard.
A condition is something that must occur for the contract to be fulfilled. Agreeing to buy a house on the condition the seller replaces the roof is an example.
Contracts can be a simple transaction or a complex, negotiated agreement. In situations involving businesses or large amounts of money, hiring an attorney to represent you is wise for your best interests.