My Business Contracts – Are They Binding?
All businesses should use contracts to govern their most important relationships. If you are just now thinking about starting a business, keep in mind that contracts help to protect you from potentially risky business relationships and disputes. It’s a tool to lay out the responsibilities and rights of all parties to which it pertains while offering legal protection. There is one other key piece of how contracts work: they are only binding if they are legally valid/enforceable.
There are all kinds of contracts, each with a different form to address unique business relationships and situations that different industries, markets, and relationships require. Most contracts that are legally binding are written. However, there are some forms of oral contracts that may be legally enforceable as well. Invariably, each contract is as unique as the parties using it and their respective needs.
Determining if a Contract is Legally Enforceable
In general, for a contract to be considered enforceable legally, it must have two things. These are:
- There must be some sort of exchange of value (consideration) represented in the agreement, or there is no contract to enforce. That is, the contract must include an agreement for an exchange of something for something, for example: services in exchange for payment.
- Terms of the contract must be included and agreed to by all parties. This is typically done in the form of an offer and acceptance by the separate parties.
Unfortunately, this is just the tip of the iceberg when it comes to ensuring validity. There are other factors at stakes here as well. Here’s a list of some other common restrictions that may apply to your situation:
- Minors and persons who are cognitively impaired cannot be legally bound by a contract.
- If a court determines one party was coerced into agreeing to the contract, they will invalidate it.
- Contracts making illegal demands or with illegal obligations will also be invalidated by a court.
Though these are three fairly simple examples of the restrictions that govern contract law, it gets far more complex from here. For this reason and others, talking to an experienced business attorney to help you draft a contract for all your important business relationships can save you headache and money in the long run.
What if I am using a contract and am worried that it isn’t legally binding?
The best possible thing you can do is consult your attorney before putting pen to paper. However, if you’ve already signed and have concerns about an existing contract in any way, having it reviewed by a business attorney can help you determine right away if it’s binding and what your possible options are in response. In addition, it may be that you have entered a binding contract but that some of its provisions may not be enforceable. You should know your options.
An experienced business attorney can help you draft the kinds of contracts your business will need to grow and stay protected. But there are many more things a business attorney can do besides just this. If you have any additional questions about business contracts and whether or not they are valid, or, if you wish to discuss other related legal issues, call Stephen Rizzieri at 214.434.1017 or fill out the form on our site today.