What is a contract?

A contract is an agreement between two or more persons (individuals, businesses, organizations, or government agencies) to do, or to refrain from doing, a particular thing in exchange for something of value. Contracts can generally be written using formal or informal terms, or they can be entirely verbal. If one side fails to live up to his/her/its part of the contract, there’s a “breach” of contract and certain remedies for solving the differences are available. The terms of the contract, meaning, the who, what, where, when, and how of the agreement, define the binding promises of each party to the contract.

Contracts are considered valid the moment that the offer is accepted. For example, if you shake hands and agree to purchase someone’s old TV for $30, you have a valid contract. The contract is complete when you give them the money and they give you the TV. Contracts can be as informal or as formal as the occasion calls for. Although, if you are making a deal for anything that is worth more than $500, it is usually a good idea to have something in writing, just in case something goes wrong with the agreement.

Written contracts must contain the names of both parties, the agreed upon terms, and the parties’ signatures to be valid. An example of a valid contract is: “Luke Luck hereby agrees to sell Ducky Lucky 400 meal worms. Ducky Lucky agrees to pay $20 for the meal worms.

Luke Luck’s Signature and Date

Ducky Lucky’s Signature and Date”

If you are trying to draft a form contract for your business, it would be in your best interest to have a business attorney look over the finished draft. A business attorney can offer feedback as to provisions that can protect both the buyer and seller and ensure that any disputes over contract agreements remain out of court.

Case Studies: Illustrating Contractual Challenges and Solutions

Case Study 1: Construction Project Contract Breach

Jones Construction, a renowned construction company, enters into a contract with Smith Enterprises to build a commercial building. The contract specifies the scope of work, timeline, and payment terms.

However, midway through the project, Smith Enterprises fails to make the agreed-upon payments, resulting in a breach of contract. Jones Construction files a lawsuit against Smith Enterprises to recover the outstanding payments and seek damages for the delay caused by the breach.

Case Study 2: Verbal Agreement Dispute Between Partners

John and Sarah, two individuals, enter into a verbal agreement to start a business together. They discuss the terms, responsibilities, and profit-sharing arrangements but fail to put the agreement in writing.

Over time, disagreements arise between John and Sarah regarding the interpretation of the agreement and the distribution of profits. With no written contract to reference, John and Sarah struggle to resolve their differences and face the possibility of legal action to determine their rights and obligations.

Case Study 3: Freelance Work and the Importance of Written Contracts

Emily, a freelance designer, enters into a verbal agreement with Smith Enterprises to create a website. They discuss the project details and pricing but do not document the agreement in writing. As the project progresses, Smith Enterprises requests additional work beyond the initial scope without discussing the additional costs.

Without a written contract outlining the scope of work and pricing for additional requests, Emily faces challenges in negotiating fair compensation and risks financial losses.