Ask the Attorney: Basics of Contracts

Q: I am thinking of entering into a contract with someone, but I want to be sure that we come to a legally enforceable agreement. What makes a contract valid?

In many cases, a contract can be either oral or written and still be enforceable.  Despite this, whether or not the contract was written is still important, as it will significantly affect how the parties to such a contract behave when there is a disagreement.

For a contract to be enforceable, the agreement must meet a number of basic criteria. In specific cases, such as agreements involving the conveyance of an interest in land, Pennsylvania law requires that an agreement must be written in order to be legally enforceable. 

Beyond that, any contract, whether oral or written, must consist of an offer, an acceptance and what lawyers know as consideration.

Every valid contract begins its life as an offer, where a party to the ultimate agreement proposes to do something, refrain from doing something, or otherwise behave in a manner that is potentially beneficial to the other possible parties to the agreement. 

If the person making the offer makes a proposal in good faith, with the intention of being legally bound to hold up his end of the bargain if the offer is accepted, then there is a legitimate offer that can form the basis for a valid and enforceable contract. 

Such an offer can be obvious, or it can even inferred from the actions of the party that is allegedly making the promise.

After an offer is made, no contract can exist until the other potential party to the agreement accepts it. People can accept an offer explicitly, for example by signing a written agreement, or they can accept an offer simply by beginning to perform according to what is expected under the proposed agreement. 

Once there is mutual acceptance of an agreement by all the involved parties, a valid contract exists as long as the agreement is supported by consideration.  Consideration is the meat of the contract, the underlying tit-for-tat, exchange of benefits that convinces each party that it is worth their while to enterinto the agreement. 

That is, each party must have bargained for something, exchanged promises, or otherwise agreed to give and receive something in order for a contract to be enforceable. 

That means that a promise to give someone a gift is not an enforceable contract unless the lucky beneficiary agrees to give something in return, and the person making such an offer, known as an illusory contract, can change her mind at any time without fear of liability.

(This article is intended as a discussion of legal topics that are often confusing to many lay people; it is not, and should not be relied on, as legal advice. Attorney Jesse White is licensed to practice solely in Pennsylvania and any information discussed relates solely to Pennsylvania law. If you have a question for the attorney, contact The Law Office of Jesse White in Cecil at 724-743-4444 or visit www.jessewhitelaw.com.)

Roger December 28, 2012 at 12:02 PM
Two questions: 1. What is the distinction between a Contract (the term used here), and a Service Agreement? Are the terms used interchangeably, and carry the same legal weight? 2. Does the Contract require anything explicit for remedy and enforceability when one party perceives breach? For example, does the Contract require specifics regarding adjudication procedures, location, applicable law, in order to be enforced after perceived breach? Thanks.
Roger December 30, 2012 at 10:20 AM
I did not think my questions were difficult to understand, or answers would be hard. Bad assumption...?


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