Contract Basics for New Business People
It can take time as a business owner to fully understand contracts. The definition is relatively simple. A contract is a mutually understood agreement that contains an offer for a service or a product, an acceptance of that offer, and consideration from each party giving the other a service, payment or deposit. Contracts seem like they should be a common sense concept but can be full of complications and legalese. When you start your own business, it is crucial you understand the basics of contracts so that you know your rights and obligations to others. You may need to hire employees with a basic at-will employment contract. You may need to work with vendors that already have contracts they want you to sign.
What is Consideration?
Consideration is often the hardest element of a contract for new business people to understand. It is easy to see the offer and acceptance. Someone who is a painter offers his services through advertisements. When you call and ask him to paint the interior of your new store, you accept his offer. Consideration is when both you and the painter provide something of value in exchange for the promise for the painter to perform and the promise for you to pay him. Consideration is a promise, action or payment that neither of you are previously legally obligated to give. Consideration on your side could be a deposit. The painter’s consideration is the promise to show up on a specified day.
Oral vs. Written Contracts
Both oral and written contracts are enforceable in Florida. However, written contracts are always preferable because they spell out the terms and each element. If a disagreement reaches court, a judge can look at the terms of the contract and confidently rule in favor of one of the parties. Issues arise with oral agreements because they can turn into he-said-she-said disputes. Oral agreements tend to have little proof to enable them to stand up in court, particularly if no one performed any action in relation to the agreement. However, if someone performed his or her part of the oral agreement, the court is likely to enforce the contract and order the other party to perform. For example, if you paid a deposit but did not sign any paperwork for the painter and he never shows up, you still have a receipt as proof of your consideration in the oral contract.
When is an Agreement Not a Contract?
You cannot contract for someone to do something illegal or impossible. Also, it is not a contract if there is no consideration exchanged. If you call up the painter and say you want him to come paint the store next week and he replies that he will see if he can make it, no contract has been formed. You have not promised to pay him, signed a document stating you will pay him, or put down a deposit. He does not promise to paint your business and give up the chance to take another job. There is no consideration.
If you have questions about contracts or think you need one written or viewed, contact the experienced attorneys at the Law Office of Larry E. Bray at (561) 571-8970 right away. We serve clients in Boca Raton, West Palm Beach, and the surrounding areas.