At the core of nearly all business and consumer relationships is a contract.  No matter what business you are in, how long you have been doing business or who you are doing it with, your life and your business are being governed by numerous contracts.  Contracts play a daily role in our lives.  You likely have a contract with your lenders, landlord, suppliers and utility providers.  You may also have a contract with your insurance company, hair stylist or employer.  Many other common daily tasks, such as eating at a restaurant, may create legally enforceable contracts.

The basic definition of a contract is an exchange of promises between two or more parties to do, or refrain from doing, an act.  At its most basic level, a contract is created any time one person makes an offer that is accepted by another person, and there is some mutual exchange of value between those parties.  An offer, an acceptance and mutual consideration are the three fundamental elements to creating a contract.  The offer followed by an acceptance, sometimes also called a “meeting of the minds,” is fundamental to identify the obligations of each party.  Consideration ensures that somethingis being exchanged.  In some cases, the law requires that consideration be adequate, that is, a relatively reasonable price. Other times, required consideration may be nominal, where just a dollar will do.

Types of Contracts
   Most think about contracts as written legal documents that are signed and formalized.  However, contracts take many forms.  Contracts can be oral, written, or implied by parties’ actions.
   An oral contact is an agreement between two parties that has been spoken, but not agreed to in writing or signed by both parties.  Beware of verbal agreements.  When creating a verbal contract, parties routinely fail to discuss many things may seem to be obvious.  Later, the parties often have different understandings or recollections of their conversation.  Conversely, with a written contract, the parties can ensure that as many details as possible are included, making disagreements later on far less likely.  This ensures that everyone can see in black and white exactly what they are agreeing to and make any changes or clarifications before becoming legally bound. 
   An implied contract (sometimes called an implied-in-fact contract) is one created by action, but without an express agreement.  An example of an implied contract can be found anytime you order food at a steakhouse.  The patron and server do not explicitly state an offer to purchase, and acceptance to sell, the steak ordered off the menu at a price of $25.00.  However, that agreement is implied.  When the food is ordered with the waiter, the patron impliedly expresses their intent to purchase the food. That conduct implies action and creates a legally enforceable contract.  

Tricia M. Darby, Esq.
Darby Law Practice