“A valid contract requires voluntary offer, acceptance, and consideration.” – Robert Higgs
Are you a small business owner? Or, perhaps you own a medium to large enterprise. Are you considering signing a contract with a new business partner? Should you even go through the legal process, which is time-consuming and costly, or will it be acceptable to have what is traditionally known as a “gentleman’s agreement” between your company and your new partner?
As an aside, a gentleman’s agreement is defined as an “informal and legally non-binding agreement between two or more parties.” Additionally, it is critical to note that the raison d’etre of the gentleman’s agreement is that it “relies upon the honor of the parties for its fulfillment.” It is not legally enforceable. Thus, at the outset of this article, it is never a good idea to have an informal contract that is not legally enforceable.
Contract Law: What is a legally binding contract?
Before we look at the reasons why you should hire a Clearwater business litigation attorney to draw up your business contracts, let’s look at a succinct definition of what a legally binding contract is:
The legalmatch.com website defines a legally binding contract as a “contract agreement that is valid under state and federal contract laws.” Additionally, the “legally binding” part of the contract “means that the parties must obey the terms written in the contract and perform their contract duties as stated.”
The quotation mentioned above by Robert Higgs highlights the quintessential essence of a contract or agreement between two parties. In other words, when signing a contract, both parties need to agree to voluntarily and accept the terms set out in the contract.
The legally binding contract has to meet specific requirements. The fundamental element is that there needs to be a valid offer with a corresponding acceptance. And both parties need to exchange something of value.
It is interesting to note that a written document setting out the terms and conditions of the contract is not always required. However, it is not a good idea to have a verbal agreement as a contract.
Reasons why you should hire a legal expert to draw up the contract
As highlighted above, the raison d’etre for a contract is to formalize an agreement between one or more parties. The example used above is that of your company signing an agreement with a new business partner. While this is only one of a multitude of reasons to sign a contract between two or more legal entities, this is a well-known reason for drawing up a contractual agreement between two parties.
Thus, the single most important reason for hiring a business attorney to draw up the contract is to ensure that, in the fullest sense of the terms, it is vital for both parties that the agreement is well-structured and consists of all the elements that make it legally binding.
When a new business relationship is fostered between a group of people, it’s easy to assume that a legally binding contract is not necessary. Everyone is speaking the same language and will work well together. However, it is imperative to draw up the contract to ensure that everyone is “on the same page,’ and there is no room for misinterpretations and misunderstandings at a later stage in the working relationship.