Contracts are agreements between two or more parties which creates legal obligations for the parties involved. Contracts can be in an oral form or in a written form.

It is important to note that an oral contract will be much more challenging to enforce and should be avoided whenever possible. There are some types of contracts which are required to be in writing in order to be valid.

For example, contracts that involve a significant amount of money, such as over $500, must be in writing. Most individuals encounter contracts in everyday dealings in all aspects of their life.

Because of this, it is important to understand the rules that govern contracts and to ensure that a contract is valid. A valid contract must include the following elements in order to be enforced:

  • An offer (Buyer will pay $1,000 for 1,000 cupcakes);
  • And acceptance of the offer presented with (Seller accepts $1,000 for 1,000 cupcakes);
  • A promise to perform (Seller says they will perform);
  • A valuable consideration ($1,000);
  • An event or a time by when performance must be made (1,000 cupcakes exactly 3 weeks from now);
  • The terms and conditions for the performance (The cupcakes must be vanilla and have chocolate frosting); and
  • Performance (The 1,000 cupcakes are delivered and the seller is paid $1,000).

In addition to this, a court will not enforce certain types of contracts unless they are in writing, such as contracts which are governed by the Statute of Frauds and are required to be in writing. Contracts which are governed by the Statute of Frauds include:

  • Marriage contracts;
  • A contract that will not be performed within the timeframe of one year;
  • An interest in land contract;
  • A contract to pay the debt of a decedent; and
  • Contracts for the sale of goods over certain amounts.

The majority of contracts are governed by the statutes of the state in which they are formed. Therefore, it is important to consider the laws of the jurisdiction when handling a contract issue.

What are the Required Elements for a Contract?

As previously noted, there are certain elements contracts are required to contain. A contract is required to have a legal purpose and cannot be used for a purpose that is not legal.

For example, an individual cannot enter into a contract to commit a crime, such as hiring a hitman. There must also be mutual agreement between the parties to the contract.

This mutual agreement is referred to as the meeting of the minds where one party offered something to another party for acceptance. When the parties to the contract sign the contract, it demonstrates that there is mutual agreement among the parties and that the parties are on the same page.

There are certain types of offers which may not have an expiration period. In these instances, the offer will remain open for a reasonable time. An offer may be revoked until acceptance occurs.

Acceptance typically means agreeing to the terms of an offer. If any changes to the terms of the offer are made, it will be considered a counteroffer.

States have different rules on this issue and, therefore, it is important to consider the regulations in the jurisdiction in which the contract is formed. The element of consideration is essential in order for a contract to be valid.

Consideration is when one of the parties agrees to provide something of value in exchange for some benefit. Consideration may be an item, such as a vehicle, it may be money, or it may even be manual labor.

Consideration must be something of actual value. It is also important to be aware that there is a difference between a gift and a promise.

For example, if one individual gives another individual a pair of shoes, it is not considered a contract even if the giving individual provided to give the receiving individual a pair of shoes and they did not. However, a contract does exist when the pair of shoes is exchanged for completing a specific task, such as if the individual states they will provide a pair of shoes in exchange for cleaning the individual’s home.

The parties to the contract are required to be legally competent. Mentally impaired individuals and minors are not able to validly contract.

In addition, the parties are required to be of sound mind and not under the influence of drugs or alcohol. All of the parties must come to an agreement based on their own free will.

A contract will be deemed void if there is a mistake, duress or fraud by one or more of the parties.

What Are There Different Types of Contracts?

There are numerous different types of contracts which individuals may enter into. Commonly used types of contracts include:

  • Express contracts that specify in writing or orally the exact terms;
  • Conditional contracts which are based upon the completion of a specified condition;
  • Joint and several contracts has multiple parties involved;
  • Implied contracts where a court finds that a contract exists based upon the facts and circumstances;
  • Unconscionable contracts, which are contracts that place one party at a greater advantage than another one and are, therefore, considered unjust;
  • Adhesion contracts, which are considered to provide one party with more bargaining power than another and, therefore, result in a “take it or leave it” type situation;
  • Option contracts, which allow individuals to enter into another contract with another party at a later time; and
  • Fixed prices contracts involve a buyer and a seller that agree to pay a fixed price for a project.

It is important to note that contracts may come in many forms and are something that most individuals deal with every day. If an individual is unsure what type of contract they entered into, they should reach out to an attorney to learn more.

Can Anyone Enter into a Contract?

Simply put, no, not everyone is able to enter into a contract. As previously noted, in order for individuals to enter into contracts, they are required to have mental capacity and maturity. Contracts have these requirements because it prevents certain parties from taking advantage of other, less sophisticated parties.

How Old Do I Have to be to Make a Contract?

Generally, the age at which an individual may enter into a binding contract is known as the age of majority. In most states, this means 18 years of age.

It is important to note, however, that certain states, such as Alabama, have different ages of majority. In Alabama, the age of majority is 19.

What Mental Capacity is Required to Validate a Contract if One is Over Age 18?

The test to determine the mental capacity when an individual has passed the age of majority are complex and vary by state. In some states, the appreciate effects test is used.

This test examines whether an individual has the capacity to understand what they are doing as well as to appreciate the effects of their actions. Other states may use the control test, which examines whether the individual can control themselves regardless of their understanding.

If Someone is Drunk When They Make a Contract, Can They Get out of it?

The laws regarding this issue may vary by state. Generally, intoxication can make a contract voidable only if a party has reason to believe the other party is too intoxicated to appreciate their obligations under the contract.

The majority of courts examine whether the intoxicated individual understood what they were agreeing to as well as whether or not the other party had reason to know of the intoxication. It is not relevant whether the individual appeared to be drunk at the time of the contract, only whether or not the other party had reason to believe that the intoxicated individual lacked the mental capacity to understand the agreement.

Should I Contact a Lawyer Regarding My Capacity to Contract Issues?

The question of whether an individual had the capacity to enter into a contract is a fundamental question in any contract that is formed. If you believe that you should not be bound to a contract which you signed for any reason, you should consult with a contract lawyer to help you evaluate your obligations and responsibilities as well as to determine if the contract may be voided.