Essential Elements of Contracts: What Your Need To Know
When looking for employment within contracts and contract management, how do you stand out against your competitor? Competition can be very steep, so understanding all aspects of contracts can be extremely critical. Whatever the situation, the person that is the most qualified individual will always be given the first consideration.
Contract management can also be important in the case of a business owner. If you don’t understand the basics of contracts, you can put yourself in a position of being at risk financially. Whether you’re a small business owner who’s looking to learn how contracts work or a contract employee looking to update your knowledge, below are six elements of a contract, so that you have the fundamental information about this.
To begin a contract, an offer must be extended. Usually, the offer is extended by the individual or company, who initiated the original point of contact between the two parties. An offer should include the fine points of the agreement, including the terms and conditions.
After an offer is extended to an individual or an organization, the offeree then has the chance to accept, reject, or negotiate the proposal that was extended and its terms and conditions. There are three ways that an individual or company can legally accept an offer and that is via mail, email, or verbally.
The ‘meeting of the minds’ or mutual agreement (additional terms include: genuine agreement, mutual assent, and consensus ad idem), in reference to the contract law, is the occasion when both parties have mutually recognized the contract, and both parties have agreed to enter into the contracts and its terms. Now, even though both parties have agreed to the terms, legally, it can be voided for a variety of reasons including duress, undue influence, fraud, or misrepresentation.
By legal definition, consideration is payment or money. It’s the answer to why someone is entering into the legal contract. It doesn’t necessarily have to be money; it can be products, property, protection, or services that are offered instead of money. The point is that something of value must be exchanged for it to be considered a valid legal agreement.
Capacity is “the ability, capability, or fitness to do something – a legal right, power, or competency to perform some act. It’s an ability to comprehend both the nature and consequences of one’s acts.” Therefore, when entering into a contract, each party has to have the legal capacity to do so for it to be considered legally valid. For example, both parties have to be mentally competent, meaning not on drugs or under duress or that minors (in the US, it’s someone 17 years old or younger) can’t legally enter into a contract.
Lastly, a contract can’t be created for anything that is considered illegal, i.e. an illegal product or service. An example of unlawful service is that of an arms dealer who plans to sell to a minor, a drug dealer, or a seller of stolen merchandise.
Understanding the fundamentals of contracts is just the beginning. Taking a contract management certification online course is an excellent way to ensure you have an in-depth knowledge of contracts, which is necessary to move forward in contract management.