NoNonsenseLaw.Com

Most people think a contract is a written document. A legally binding contract is both simpler and more complicated. First of all, for there to be a contract no writing is required. An verbal agreement between two people is a contract. Suppose a fencing salesman comes to your home and proposes to build a fence for $1,000, and you say great idea, when can you start? He says tomorrow, and you say see you then. In this example, there is a legally binding contract. No writing is required.

Where the law gets complicated is that there must be consideration. Classic contract law would say that there must be an agreement between two parties for which consideration is exchanged. So just what is this nonsense legal term consideration mean. The simplest way to put it is that there must be an exchange of promises. Suppose a rich aunt tells her nephew, I will pay you $100,000. She puts it in writing, signs it before a notary public, publishes it in the paper, and goes and tells everyone on TV that is what she is going to do so. No question that the aunt has made a promise. But, unless the nephew has promised something in exchange, or gives up something in exchange, it does not matter. There is not a contract because there is no consideration given for the promise of $100,000. If the nephew sued his aunt demanding the money, he would not win.

We could change one fact, and say that the aunt said “if you graduate from college, I will pay you $100,000.” Then, there would be consideration, and if her nephew completes college, he is entitled to the money.

Why contracts are then written up: Of course, when in a court room, it can be difficult, if not impossible to prove, a contract that is not in writing. Thus, its important to try to get all agreements down to a writing when you can. It is also a good idea, because when a contract is written, the parties are better able to understand what everybody’s obligations are. Further, some contracts required by law to be in writing. Though it varies from state to state, they are usually contracts to buy real estate, a contract that would take more that a year to complete, and some contracts over a certain amount of money, depending on the state.

Contracts are import in all sorts of other cases. When are in a car wreck, you have a contract with your insurance company. When you bring suit against the other driver, he has a contract with his insurance company to be defended, and your damages for which he may be responsible, they are obligated to pay.

Illegal and Unenforceable contracts: If a contract has an illegal purpose it will be unenforceable in court. Obvious examples would be contracts for to sell illegal drugs or transfer illegal aliens across the border, but there are unenforceable contracts that may not be so obvious. One would be an agreement to work below minimum wage. Such would be a violation.

Warranties: in some consumer transactions, the law imposes “warranties” by the seller. A warranty is roughly a guaranty that product sold has certain properties. The most state law says that when goods are sold, they have three warranties: (1) warranty of merchantability, (2) the warranty of fitness for a particular purpose, and (3) warranty of title.