Contract Law

A contract is a legally binding agreement between two or more parties that’s enforceable by law. However, not all contracts are created equal. In fact, some contracts aren’t even valid.

Contract law can vary from state to state. A contract that is valid in California may not be enforceable in Florida. A form contract downloaded from an online source, although correctly formatted and full of legal terminology, may not adhere to the contract law requirements in the state in which you operate your business. As a businessperson, it is imperative that the contracts you’re relying on to protect your business are doing just that, and not leaving your company vulnerable.

Under California law, a contract must have three (3) essential components to be considered valid and enforceable. Those components are an offer, acceptance of the offer, and consideration. Let’s take a moment to discuss each must-have component below:

Component #1: An offer

The first required component of a contract is the offer. An offer is a written or verbal statement of either party indicating their intention to act upon acceptance. An offer can be renegotiated, withdrawn or rejected at any time before acceptance. However, once the offer has been accepted and the contract signed, your company’s considered a party to the contract and will be obligated to perform or not perform as agreed.

Component #2: Acceptance of the offer

The second required component of any California contract is acceptance of the offer. Once an offer has been presented, all parties to the contract must fully and openly accept the offer. An offer can be accepted in writing, verbally over the phone, or via the U.S. mail. In the latter, the offer is deemed accepted from the moment the mail is placed inside of the mailbox; not from the time the recipient receives the mail.

Often, in response to an offer, a party will suggest revisions or attempt to change the conditions of the original offer. In these instances, the original offer is considered rejected, and the revisions and new conditions are deemed counter-offers.

Component #3: Consideration

The third must-have component of a contract is the consideration. Consideration describes the value that will be given to the parties of the contract in exchange for their performance. There are various forms of consideration including, but not limited to, money, services, and tangible items. Without consideration, the performances promised in your contract are merely gifts. To satisfy the validity threshold, your California business contract must evidence some form of consideration on behalf of all parties involved.

As a business owner, you’re probably no stranger to contracts. Regardless of the nature of your business, doing business with a business deal can prove to be essential to your company’s success. With the decline of the U.S. economy and rise in the number of breach of contract claims, now is the time to reevaluate the contracts you’re using to protect your business.

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An oral agreement is a contract that have been agreed by two different peoples or groups, via spoken communication. Oral agreement is quite different to a written agreement, in which the contract is a written report/document. Oral agreements are enforced in California. This is why you need to know and understand the basics of oral agreements and how it is enforced in this state.

Are All Oral Agreements Enforceable in California?

Generally speaking, oral agreement is indeed legally enforceable. Even though for other complicated contracts, consisting of the ones in complex business transactions, the contractual parties will create agreements in writing so as to avoid any conflict regarding the given terms.

However, certain contracts ought to be in writing so as to be legally enforceable. For instance, the ones developing rights and responsibilities in and over legal properties should put the agreement in writing to be legally enforceable.

Do you Need a Written agreement in California?

Contrary to what most people believe, informal exchange of words and promises can still be used as a valid contract in California courts. This also means that it is considered as valid as any written contract. Spoken contract is also known as an “oral contract,” or a “verbal agreement.” It is important to know that verbal agreement makes use of words and phrases. All oral contracts as well as written contracts are classified under verbal contracts.

Courts in California have commonly ruled that if the mentioned parties have acted as though there has been a formal contract that is written and signed, then the agreement exists. However, most court jurisdictions in California require a signed document for certain types of contracts (eg. real estate transactions). This law is commonly referred to as state of frauds. The Statute of Frauds prevents false allegations of excising contracts that were not there before

When is a Written Settlement Void?

Also know that in any California court, having a written contract doesn’t necessarily ensure its validity or enforceability in any way. A contract can be deemed as unenforceable if it involves the other party to do an illegal act, it it was signed and agreed on while the person is intoxicated or drugged, if there is an extreme disparity between the two parties and the weaker group being given onerous terms, and many more.

Implied and Expressed Terms Definitions in Contracts

Express terms- Are expressed terms that have been used by the 2 parties in writing, or even orally inside the agreement.

Implied Terms-These are terms which have in no way been expressly noted by the parties. The terms are implied by the parties either by customs or law.

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What is contract law?

Contract law forms the basic part of our society as it lies at the heart of our law system. It is a voluntary, private agreement made by parties that agree to exchange valuable things with one another. Most exchanges are straightforward matters that easy to perform without encountering any problem. However, some exchange may not be performed to everyone satisfaction.

In most cases contract performed should include an implied-in-law covenant of good faith that each party agree to act in good faith and deal fairly with each other. This means that no party is expected in bad faith to attempt to cheat the other party. However, in some cases, complicated transactions may lead to difficulties that the parties may not be envisioned at the onset. Some complication may take a lot of time and resources to solve.

To avoid complications, it is important to have a proper contract that the onset of the contract. A written contract can be the most appropriate form of contract to use. However, both parties should reasonably trust another’s good faith and have a good understanding of the exchange before undertaking it. The written contract should state clearly the obligations of each party and the essential terms of the exchange. A good contract should at least cover possible complications that might arise.

Various kinds of Contracts:

There are three types of contracts: written, oral and implied.

Implied contract:

Implied contract is mainly based on the decision of a court of law. They can be either written or oral, or even no agreement made. But, there is some enforceable agreement that courts can legally determine that the contract really existed.

Oral Contract:

The oral contracts are made verbally without any written document. This type of contract has many limitations as compared to written contracts as they are limited to time. For instance, the time that you can file a lawsuit that involves an oral contract is two years.

Written contracts:

Written contracts are written on a paper and include signatories of all parties involve. They are the most reliable type of contracts and are highly recommended.

Proving Implied and Oral Contracts:

The importance of implied and oral contracts especially in employment law is necessary to show that just cause is necessary before employment can be terminated. In case an employee alleges that an implied or oral contract require just before termination, the court will help to determine whether the allegation is valid or not.

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