Monday, December 2, 2013

Contract Law 101: What every business person should know

You don't have to go to law school to learn how to create a contract. But there are some things every ag professional should know about contract drafting. A contract only needs three things to be enforceable: an offer, acceptance, and consideration. These are the basics every law student learns in their first semester:

1. Offer. Formation of a contract begins with an offer. One person offers to do something in exchange for something else. Offers are “revocable” until such time that they are accepted or changed. But you cannot revoke an offer after it has already been accepted. That’s why it’s always good to put a time-frame on how long an offer remains open. You also want to be sure an offer is clearly communicated, whether verbally or in writing.



2. Acceptance. Acceptance of the offer must be absolute to form a contract. One of the more common questions I get on this subject goes like this:
Seller: “I’ll sell you my farmstead for $100,000.”
Buyer: “I accept your offer, but you have to throw in the antique tractor in the barn.”
Seller: “I’ll include the tractor and sell you both for $125,000.”
Buyer: “I don’t want the tractor for that price, but I still want to purchase the farmstead for $100,000.”
Seller: “I no longer want to sell you my farmstead.”Does the Seller have to sell the farmstead for $100,000? 
The answer is most likely not, and here’s why: whenever someone attaches another term or condition onto their acceptance, a new “counteroffer” is formed requiring new acceptance. The exchange above included one offer and three counteroffers, but never did one party accept the offer of the other.

3. Consideration. Consideration is the value given by both parties to a contract that induces them to enter into the agreement. You need to know two things about how courts view consideration. First, courts treat even a small amount of consideration as sufficient. Second, courts are reluctant to inquire into the adequacy of consideration. If you are foolish enough to sell something worth $100 for $1, courts will still enforce the contract, absent duress, incapacity, or other special circumstance.  Courts will generally not protect someone from a bad deal.

You don't need an attorney for every contract, but you should understand the basics. In my next post, I’ll address when you need to pick up the phone and ask an attorney for help.

4 comments:

  1. Thanks for sharing this advice! I think that one of the most important business tips is the safety and well being of your employees. That is why, as a small business owner, I am looking into an ATM surveillance system the will help protect the workplace both inside and out.

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  2. I do agree with your thoughts, but apart from contract drafting, there are many other things are that you should know as a business person. Some of them are policies of your business, financial services for your business, commercial property transaction of your business and how you can save intellectual property of your business. So, in my opinion it would be better to take help from corporate lawyers as you can see here http://www.sor-solicitors.ie/corporate-lawyer-solicitors-law-firm.asp they are helpful for you in each aspect of your business.

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  3. HI Todd Janzen!

    I do agree with what you have written in this post. Your post is too good for the beginners and it is great to write for the people who do not know how to write a better and impressive contract. I love to read posts that professional writing for the beginners as these posts provide the plenty of ideas to work on. We are also providing the best financial services to the people as financial advisor orange county you can get the information from here that is good for the inverters.

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  4. Todd thanks for sharing this information with us and I get many valid points from your article. Your tips are so helpful for new investors and they don't hire a lawyer when they sign a contract. But in my opinion some cases you have to hire a lawyer when read more about it you sign a contract.

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