What Makes a Contract Legally Binding?
A contract is a legally enforceable document between two or more parties defining and governing the rights, duties, and responsibilities of all individuals involved in the agreement. It acquires legally binding status on all concerned signing on the deal, including exchanging goods or services and providing legal remedies to any party impacted by the breach of contract.
What Is Contract Binding?
Contract binding is an agreement between two parties legally enforceable in a court of law. Before an agreement becomes legally binding, they must be an agreement between two parties, and the deal needs to include consideration.
Besides the agreement and consideration, many other provisions can be included in the contract binding. They are offers, performance, terms, conditions, obligations, payment, and liability.
The agreements can be written or verbal, depending on their nature. However, some contracts must be noted, such as those extending for over a year or real estate contracts. The legal agreements for binding contracts can be different depending on the state.
The contract must also be referred to state laws to ensure it is legally binding. Every contract must have an offer from one party to another. Contracts generally include a set timeframe for accepting or rejecting the offer. The proposal must be precise without including estimates or letters of intent. If acceptance of the offer is not within the timeframe included in the contract, it will lapse. Withdrawn offers are also considered lapsed.
When the party receiving the offer accepts, it is deemed as acceptance. The party accepting the offer agrees to accept the precise terms of the contract. Unfortunately, the agreement is not acceptable if the party proposes new terms.
Instead, it represents a counteroffer. Which party makes the final proposal doesn’t matter because acceptance is of prime importance. Negotiations end when an endorsement occurs and must happen in writing, although the party accepting the offer can do so differently.
A critical factor of a legally binding contract is that both parties intend that the agreement has legally enforceable consequences and every party in the contract is liable to indicate they recognize the required by law to follow the contract when the agreement can be legally enforced.
Difference between Binding Contract Vs. Non-Binding Contract
If you notice the terms binding and non-binding often coming up when researching legal documents, you might wonder what the difference is between them. Whether a document is legally binding or non-binding has important distinctions because it might affect whether an agreement is a legally enforceable contract in court.
We now look at binding vs. non-binding contracts that our attorneys in Tulsa regularly create for clients and discuss how these documents and the terms within differ.
A binding contract generally includes crucial factors making the document valid. They are:
- Offer and Acceptance: When one party presents something valuable they intend to exchange with the other party for something else useful, it is considered an offer. When the value is offered, it must receive acceptance or rejection.
- Consideration: the consideration both parties receive is the benefit from the contract. The benefit can be monetary, objects or services, or anything of value.
- Maturity or Intention: in straightforward terms, this indicates a meeting of the minds which means all parties involved in the contract intend to create an enforceable agreement.
- Legality: The contract mustn’t contain unlawful promises or considerations for legality and validity. For example, considering promises or actions against the law like committing a crime.
- Capacity: the person authenticating the contract must have the legal power to do so and not be a minor considered incapable of signing legally enforceable agreements.
Binding contracts are agreements including all the above without invalidating issues that might lead to undue influence, coercion and duress.
Non-binding contracts are agreements that have failed because they lack one of the crucial elements of valid contracts. It ensures that the contents of the contract are not enforceable in a court of law.
For example, the letter of intent is used by parties intending to record some preliminary discussions to ensure they are on the same page but do not deliberately commit to a binding contract.
Binding contracts are enforceable in a court of law, while non-binding contracts are not enforceable promises agreed by all parties of the contract to fulfill. Therefore if the commitments presented in the contract are non-enforceable because they don’t contain the necessary elements, it becomes a non-binding contract.
Aaron Bruner Law is expert in creating binding contracts enforceable in a court of law. Therefore, if you want to stay informed when you sign your following legal document, kindly seek advice from these professionals to determine whether you are signing a binding or non-binding contract.