The Sky’s the Limit
In their simplest form, contracts are merely mutual promises. These promises may be between two people or two businesses. They may be among more than two people.
There are certain actions that must be taken in order to form a contract. Contracts provide multitudes of options, only limited by your creativity (with a few exceptions). You are not permitted to agree to something that violates laws or policies. Other than that, you are free to agree to anything you want, as long as three elements exist:
- Acceptance (accept the offer)
- Consideration (each party is getting something from the deal)
Contracts May Be Oral or Written
Contracts may be verbal or they may be in writing. A written agreement is easier to prove, however, a verbal agreement is equally valid.
Contracts are Mutual Agreements
Contracts are the mutual agreement of two or more people. There can be no contract where there is no agreement. This is sometimes called a requirement of a “meeting of the minds.”
An offer is made when one person tells another they are willing to enter into a particular agreement.
For example, I say to you, “I am willing to give you $50 to give me a ride to the airport this Friday.” I am making you an offer. The particular words I use are not important. I could have said, “Will you take me to the airport this Friday? I’ll give you $50 if you do.” This will have the same effect. I have made you an offer.
An offer may only be accepted by the person to whom it was made.
Your friend cannot accept my offer of $50 in exchange for a ride to the airport. Only you may accept this offer because in the above example I only made the offer to you. If you agree to my offer and all of its terms, you have accepted my offer.
If you say, “I’ll take you to the airport this Friday if you pay me $50,” you have accepted my offer. If you only agree to some of my terms, you have not accepted the offer and I do not have to agree to your changes. If you say, “I’ll take you to the airport this Friday for $100” you have not accepted my offer. You have made a new offer that I am free to accept but I am not required to do so. If you say, “I will take you to the airport next Tuesday for $50” you have not accepted my offer. Again, you have proposed to me a different offer that I may accept or reject.
All contracts require consideration. Consideration is what each side gives up in exchange for what is or she is getting from the contract.
My consideration in the above example is my payment to you of $50. Your consideration in the above example is giving me a ride to the airport.
Under most circumstances, without those promises going both ways, there is no consideration and therefore no contract.
Consideration may also be found in a promise not to do something. If I say I will pay you $50 not to do something, your promise not to do something is also consideration. You are still giving something up – you are giving up the right to act in a certain manner.