Contracts are valuable in everyday life. Contracts tell people how to act and ensure that a person receives what he or she thought he or she would receive in exchange for some action.
No one wants to take a job, work for a month, and find out they aren’t actually going to be paid what they thought they were going to be paid. No one wants to call the cable company and ask for a package with 100 channels, pay for the company’s services, and find out after the cable employee leaves that you will only be able to receive one channel.
How Do You Prevent Being Duped?
How do you prevent this? Most of the time you can’t make a person do something they did not agree to do.
If you have a contract, however, you have the other person’s promise to do something. If the contract is clear, you have the other person’s promise to do exactly what you thought he or she was going to do.
Contracts Provide a Remedy
People will always break contracts, and litigation will ensue. The beauty of a contract is that you have a remedy when people break their promises. You simply need the promise before you can get the remedy.
Contracts are only promises to act, or refrain from acting, in a certain way. With the exception of promising to engage in illegal conduct, you can exchange promises of any kind you want. Creativity solves a lot of problems.
Verbal Versus Written Agreements
The more clear your promises, the less likely there will be misunderstandings and lawsuits about the contracts. Verbal agreements are valid contracts just the same as written agreements are valid contracts. However, verbal agreements are much harder to prove, and therefore much harder to enforce.
Elements of Contracts
All contracts have three main elements:
An offer is an expression by one person that he or she wishes to enter into an agreement with another. An offer is what is proposed to the other person.
If I ask you to take my aunt to the doctor in exchange for me babysitting your kids, I have made you an offer.
Acceptance is an agreement to the offer. Only the person to whom the offer was made may accept the offer. The person to whom the offer was made must accept all of the terms of the offer. If not, the person has not accepted the offer.
If a person proposes any different terms than those in the original offer, the person has not accepted the offer but rather, has proposed a counter offer. Now the original offeror may accept or reject the counteroffer, or new offer.
If you agree to take my aunt to the doctor if I babysit your kids, you have accepted my offer.
An offer and acceptance must provide consideration. Consideration is what each party gives up in making a contract, in exchange for the benefit of the contract.
The consideration I am giving in the above example is that I will babysit your kids. The consideration you are giving is that you will take my aunt to the doctor.
Some consideration must be given by each side in order for there to be a contract. However, the value of the consideration does not need to be equal. Courts will not engage in weighing of amounts of consideration.
You Probably Enter Contracts Every Day
With an offer, acceptance, and consideration, a contract has been created. You make many, many promises during daily life that actually form a contract.