Business contracts underlie most business relationships. For that reason, it is helpful to know what the requirements are for a valid business contract to help avoid disputes and respond to them when they arise and help preserve important business relationships.
Requirements for a business contract
- Offer: a contract relationship always begins with an offer to provide some type of goods or services.
- Acceptance: a valid contract requires that the offer be accepted and the acceptance must mirror the offer to demonstrate a meeting of the minds between he parties to ensure they are agreeing to the same thing.
- Consideration: consideration is a legal term that requires the parties exchange something of value for the contract to be valid. The something of value can be money but does not have to be. It can also be a promise to do something or refrain from doing something.
- Legal capacity: the parties to the contract must have legal capacity to enter into the contract which usually means they are 18 years old or older.
- No undue influence: for the contract between the parties to be valid, there cannot be any undue influence in its formation. This means that neither party can be coerced into the contract.
- Intent: the contracting parties must have the intent to enter into the contract and must do so knowingly and voluntarily.
- Legality: the subject matter of the contract must be legal for it to be considered valid. If it is not legal, the contract may be considered void.
Avoiding contract disputes can help save time, money and headaches for business owners who rely on those relationships for the success of their business. For that reason, understanding what makes a valid business contract can help contribute to the success of the business and avoidance of costly disputes.