Is a Contract Valid Only if It Is in Written Form?

A contract can be legally binding whether written or verbal, but some agreements, such as real estate deals, require written documentation. A valid contract must include clear terms, mutual agreement, legal capacity, consideration, and intent to create enforceable obligations.

By Brad Nakase, Attorney

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Table of Contents

1. What constitutes a legitimate and legally enforceable contract?

2. How does one define a contract?

3. What is the purpose of having a contract?

4. Agreements made in writing or verbally

5. Conclusion

What constitutes a legitimate and legally enforceable contract?

A contract must be legitimate in order for it to be legally binding.

Typically, this necessitates a few essential components, such as well-defined terms (the contract’s conditions), agreement among mentally capable participants, and legality (the agreement cannot pertain to unlawful acts).

Throughout their lives, the majority of individuals will be party to many contracts. Contracts are essential in every modern transaction involving a substantial sum of money, such as an employment agreement, a real estate deal, the purchase of a vehicle, and many more.

To ensure that you leave this article with a clear understanding of what constitutes a legitimate contract, we will go over each of its components in greater depth.

How does one define a contract?

A contract, in its most fundamental form, is an agreement outlining the parameters of a trade between any number of participants. Whatever form a contract takes, verbal or written, as long as it has the necessary terms and conditions, can be legally binding under certain conditions. There are certain exceptions to this. Real estate acquisitions are one example of a contract that must be in writing per legal requirement.

In contrast to the formal, time-bound process of creating a binding contract that involves initial negotiation and counteroffers, the vast majority of contracts in everyday business deal with mundane, value-exchanging transactions.

What is the purpose of having a contract?

The parties to an agreement might lay down their intentions in writing in a contract. You don’t need a contract for little agreements like giving your neighbor a hammer. On the other hand, a sale of substantial property might quickly devolve into chaos in the absence of a legally binding contract. Here, it’s wisest to settle on a legally enforceable contract that safeguards all parties accordingly.

If there is a contract in place, then in the event of a disagreement, the parties can use it to establish what they agreed upon. Having a legally binding contract in place may expedite the resolution of any issue that ends up in court and, depending on the state’s laws, may even keep the case out of court altogether.

Agreements made in writing or verbally

A verbal agreement and a written agreement are the two main forms of contracts. Although both are permissible and can have legal force in business, a written contract is preferable for any significant commitment. This is due to the fact that in the event of a disagreement, the details of an oral contract are more difficult to argue. A written contract contains all of the terms of an agreement in one document. Having a documented, signed contract on hand makes your case much stronger in the event that you must go to court.

To be legally binding, a contract must meet five specific criteria. These guidelines describe the key parts of a legal contract:

The proposition (proposal terms)

The process begins with one side making an offer to the other. This is a rundown of the conditions that one party offers to the other and must fulfill under the law. One such example is a formal employment offer.

Accepting an offer

The second need for a legally binding contract is that the other party must accept the offer. The importance of this step in the contracting process is well-known.

The capability of each party

A legitimate contract requires that both parties fully understand and agree to the terms and conditions, as well as their respective responsibilities under the contract. They shouldn’t feel pressured or influenced in any way to sign the contract. With few exceptions, a minor is not legally able to engage into a binding contract.

Payment of some kind

A valid and enforceable contract also requires consideration, which is defined as the exchange of anything of value. Any transaction involving the sale of an unlawful item would be null and void under these conditions. Agreements in the private and public sectors are subject to this.

All parties wish to join the agreement

A legitimate contract is one in which both parties clearly want to engage into a legally binding agreement and accept the conditions as written. A legitimate contract can be established by several means of proof of intent, regardless of the form of contract.

The question is, how can you tell if a contract is legitimate? Having both parties sign a written document is considered best practice, although it is not always required, to engage into a legally binding agreement. One of the most important parts of a contract is the signer’s signature, which shows that they have freely agreed to the conditions and entered into the agreement. Electronic signatures have the same legal force as physical ones. Although they have been around longer, handwritten signatures are progressively going out of style.

Conclusion

Be cautious to check the contract’s legality before signing it to avoid any problems down the road. The ideal approach is to read it carefully and make sure it satisfies all the conditions for a legitimate contract before you sign it. Consulting a contract law expert familiar with the laws of your state is a good idea if you have any doubts or questions. Lastly, for the most solid legal protection and priceless asset in the event of significant disputes, contracts that have been written and signed are generally the way to go.

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