In short, whether or not a contract contains enforceable promises affects whether it is binding or not. There are many ways to create a legally binding contract. The best way is for both parties to jointly draft a contract and record it in writing, with clearly defined terms. However, sending e-mails, faxes or calls and accepting an exchange of services are also considered the conclusion of a legally binding contract. Failure to comply with certain requirements may result in non-compliance with a non-binding and unenforceable agreement. In addition, other factors can turn an agreement that is otherwise legitimate into an invalid agreement. For example, the price of a house is an essential term when selling a property, as the parties cannot perform the contract before deciding on the price. You should check whether your written agreement contains all the details necessary to fulfill the commitments made by the parties. If this is the case, your written agreement may be legally binding. ELEMENTS OF A TREATY Although each U.S.
state has slightly different criteria on how to create an enforceable agreement, all are essentially identical in their essential requirements. Contractual requirements are essentially common sense, as outlined below. First, the parties must have intended to create a binding obligation between them. Unless unusual events occur, you cannot “accidentally” enter into a contract. Although ambiguities in terms or errors regarding the facts that lead to the creation of a contract are discussed below, the parties must have decided among themselves to enter into a binding agreement. The foregoing necessarily presupposes that the parties are of legal age (18 or 21 years depending on the State), with clarity of mind and with the necessary mindset to seek to conclude an agreement that the courts have the power to enforce. Moral obligations to which a party does not want to be legally bound but feels morally obligated do not fulfill this required legal intent. Although factual errors may cause a party to enter into an agreement in a senseless or erroneous manner, assuming that the party intentioned to enter into a binding agreement, the courts will generally continue to enforce the agreement because the other party relied on the obligation. If, for example, a defendant made a mistake in reading the map and entered into a contract for the excavation of a trench without realizing that the soil was not sand, but solid rock, so that digging costs twice as much, the court will ignore the fact that the defendant concluded the contract on the basis of an error of valuation, and force the defendant to comply. Error of fact is not a defence, unless both parties were wrong, in which case some courts have decided that the parties cannot agree because both were wrong about the actual facts.
Errors caused by the plaintiff`s intentional misrepresentation can also void a contract, as the court will not encourage such fraudulent acts. SECONDLY, the parties must conclude a contract for the performance of a legal act. No court will enforce a contract of participation in illegal or immoral activities. For example, a contract to import illegal goods or evade taxes will not be enforceable in a court in the United States. THIRD, each party must either renounce something or transfer a benefit to the other party before entering into a binding agreement. This is called “consideration” and simply means that the contract involves mutual obligations of the parties, where each party derives an advantage from the other. A typical example is that one party buys a house by paying money to the other. A party gives money to buy the house. The other party abandons the house to get the money. It is an enforceable contract.
A related concept of consideration is reciprocity. This concept states that if a party attempts to perform a contract, that party itself must be bound by the contract. Reciprocity is actually just another way of emphasizing that each party must give up something of value in order to create a binding contract. (An exception to reciprocity are contracts with third-party beneficiaries, which are discussed below.) It is important to note that the consideration does not need to be the same or equivalent. The courts grant a great deal of contractual freedom and will not try to impose the value of the court on the parties. However, if there is no exchange and the exchange is more than nominal, the courts will view the contract with dissatisfaction. All of these concepts are aimed at enforcing fairness. the idea that you have to pay something or give up something to bind someone else. Failure to provide consideration may eliminate a contract. So if I sell you a house you already own without knowing it (you didn`t know you inherited it), then I can`t enforce the contract for you to pay me, even if you accidentally signed that contract because I really didn`t give up anything.
Some courts have held that if one is reasonably dependent on the performance promised by someone else and the other has reason to know about that trust, the contract is enforceable, even if the consideration goes in one direction. So, if I promise to give you a car as a gift and move to a remote location on that basis, the courts can enforce that obligation because you relied on my promise, even if you did not commit to paying me anything or giving me something in return, that is, it was a gift. This doctrine is called promissory estoppel. Fourthly, the essential terms of the contract must be agreed between the parties. These terms generally include: who are the related parties; who gives up exactly what and when. If the parties were unable to agree or could only agree on one or two of them, the court usually cancels the attempted agreement for reasons of uncertainty or failure to hold a “meeting of minds”. Except in unusual circumstances, a U.S. court will NOT replace its judgment with that of the parties and will not enter critical clauses. The parties are free to enter into or not to tolerate contracts, and this freedom of contract is not abbreviated or frivolously adopted by the court. OTHER REQUIREMENTS: Different types of contracts, by law or jurisdiction, may have additional requirements to be enforceable. Thus, many home renovation contracts require warnings to homeowners in a certain language, specify a grace period during which the landlord can revoke the acceptance of the contract, etc.
Contracts that involve property or that take large sums of money or long delays must often be made in writing and signed by the related party (the doctrine of the law on fraud), while other contracts that affect the rights of third parties must be notarized (trusts) or notarized and registered (title deeds). Verbal contracts are generally enforceable as long as they do not violate the scam law described above, but the time limit for filing a claim for damages for an alleged violation in California is two years from the actual breach or the time when it should reasonably have been determined that the contract was breached. Most written contracts in California have a four-year period to sue from the date of the breach or reasonable discovery of the breach. Although each state may have different limitation periods (the time when a party must bring an action), most written contracts give a longer limitation period than oral contracts. Realistically, it is always preferable to have a written contract, not only to meet the four-year limitation period described above, but also to avoid confusion between the parties and to make the case more provable in court. An old saying goes that “an oral contract is worth the paper on which it is written”. While this is an exaggeration, the basic tenant is true: try to narrow down every important contract you make in writing. You can transfer rights from most contracts to another person (award the contract), just as you can assign an existing judgment to another person. In addition, according to the third-party beneficiary doctrine, a person for whom a contract has been drawn up may be able to perform a contract even if he is not actually a party to the contract.
A typical example is that if I contractually commit to a father to raise his son and violate my obligation, the son may be able to sue me directly for breach of contract as a third party beneficiary of the contract, even if the son was not obliged to pay me anything. In this case, the rights of the son depend on the fact that the father has fulfilled the contractual obligations described above, such as the consideration, the fully agreed conditions, the legality of the contract, etc. DAMAGES FOR BREACH PROVIDED that a breach is proved, what remedy does the court grant? The normal measure of damage is the “bargain advantage.” This means that the court will try to put the injured party in the same situation as the party would have been if the violation had not occurred. For example, if you promise to sell me a 1999 car for $20,000.00 and then break your contract, the court will award me damages for the amount of the transaction. If I can buy an equivalent car for 25,000.00, the bargain advantage would be five thousand dollars and that would be my shame. Suppose I can replace the car for 18,000.00, then I have no damage and the fact that I can prove a violation will not allow me to recover financially. The measurement of damages is therefore a critical element in all cases and before taking legal action, it is necessary to carefully analyze the extent of the damages that can be proved. Too often, an angry plaintiff, who is certain that he will prevail in court in the event of a clear violation, fails to carefully consider the damages that occur, even if they are proven. While the court allocates the legal costs for filing the lawsuit and the costs for experts and testimonial reporters (see the article on litigation), the plaintiff generally does not receive attorneys` fees unless there is a clause in the contract for the award of attorneys` fees. It is not uncommon for a party to spend tens of thousands of dollars on fees, win the case, receive a symbolic verdict, and be more financially harmed by the case than by the initial violation.