Three components of a business contract. The use of contracts is crucial in business transactions due to various reasons. A properly-drafted contract safeguards your rights and minimizes the possibility of having to file an action arising from miscommunication. It is legally binding if a contract is written and complete with all the required components.
A contract that isn’t legally valid is ineffective for the business. So, it is essential to ensure the contracts you sign to run your business meet the three essential elements for the agreement to be legally binding according to Oklahoma law.
THE THREE ELEMENTS OF AN ENFORCEABLE BUSINESS CONTRACT
Business contracts may include various elements based on the intent that the agreement intends to serve. To enforce an agreement in Oklahoma, the contract must include, at a minimum, the following components:
1. The Offer
The primary element of the legality of a contract is an offering. A person makes an offer to a different party. In a sale contract, the offer is the object being sold, which could include automobiles, real estate, boats, electronic appliances, or any other tangible property. It is owned by the seller who is being transferred. The purchaser is the one who will receive the items.
In a service agreement, the contract is for the provision of services. Services offered by service contracts comprise pest control services and lawn maintenance, as well as home security, as well as maintenance of equipment. Employer contracts can be described as a contract for service where both the employee and employer sign a contract for specific services provided by the employee to the employer.
The offer must be specific about the products or services provided for a contract to be legally binding. If a contract doesn’t specify the items or services provided, it could be null and void if one of the parties decides to contest the contract later.
2. The Acceptance
If one party makes an offer, it must be acknowledged by the opposing party for the contract to be considered valid. Although the parties can honor an acceptance verbally, and a court can make a decision to enforce a contract if the offer was accepted in a “reasonable manner” under the Uniform Commercial Code, it’s recommended that both parties accept the contract by signing it, indicating that they have accepted the conditions in the agreement.
If the party offering the goods or services (the one who accepts the services or goods) offers a counteroffer, the person who is offering (the person who is offering the products or services) can take the counteroffer or decline the counteroffer.
The parties need to exchange consideration as part of the agreement and acceptance. The consideration can take money in exchange for an item or purchase, products or services, work for wages, or anything other than value. In this case, the main thing to consider is to ensure that parties exchange something valuable as an element of the offer and acceptance.
OTHER ELEMENTS OF A CONTRACT
The above three components constitute the necessary elements for the validity of a contract. However, the law governing contracts in Oklahoma is more complicated. Based on the type you are entering and who is involved in it, the contract could require other clauses to allow the contract to be legally binding. For instance, those who enter the contract must have the “capacity” to enter a contract. A minor cannot be legally bound under a contract. Neither is a person who’s been found incompetent. They don’t possess the legal capacity to sign an agreement. In some instances, it is possible that the law requires the contract to be written in writing to be legally valid or that a non-contracting participant witnesses the signatures of both parties in the contract. A contract has to be for legal reasons for it to be legal.
WORKING WITH AN EXPERIENCED BUSINESS LAWYER
You can locate DIY contracts on the internet to download for free or to purchase. However, we don’t suggest making use of DIY contracts as they could not be legally valid under the State’s contract laws or might not include all the elements necessary to make the contract valid legally even when you’ve got the three essential elements that are required in a contract, additional elements and the terms that are part of the agreement also crucial. For instance, you should ensure that you have language in place to ensure your best interests are protected by specific terms such as:
- Return Policies
- Terms of payment
- Late fees
- Limitations on liability
- Indemnification Agreement
- Terms that default
- Governing law
- Mediation clause or arbitration
- Complete Agreement
- Individual provisions are severable
- The venue for litigation
Davis Business Law can help you customize your contracts to your needs and business transactions. When you work with an experienced business lawyer who can draft the business contracts you need and agreements, you can ensure that your company is covered to the fullest possible extent by the law. Learn to draft contracts and find out more about our commercial contracting services. Do not leave anything up to chance when you begin setting your company’s foundation. A careful planning process in the early phases of your business can save you money and avoid problems in the future.