A contract spells out what two or more parties have agreed upon, and a legal contract may be written or oral. The law considers a contract binding if two parties agree verbally without having a written contract, but oral contracts can be difficult to enforce. If substantial amounts of products, services, or money are involved, protect yourself by getting a written contract.
Types of contracts
Written contracts are used in many situations. Though many contain a lot of legal jargon, they can be written in simple English. Generally, the more that's at stake, the more likely you'll want a written contract spelling out the terms of your agreement.
State laws vary regarding what types of agreements must be put in writing. In some cases, an offer may have a time limit after which it can't be signed, or one party may change their mind and cancel the agreement.
Common situations that usually require written contracts include:
- Real estate sale, lease, or rental
- Adoption agreements
- Business agreements
- Sales contracts for major items (such as a new car)
Contract law varies from state to state, so you should be familiar with your state's laws on the type of written contract you are contemplating before you sign.
Verbal contracts
If you make a one-sided promise or offer, it is not considered a legal contract. Instead, it's considered a gift. For instance, if you tell a friend you will come over this weekend and help them move their furniture to a new house, but then you don't, your friend could not sue you for breaking a contract.
On the other hand, if you promise to move your friend's furniture in exchange for the friend creating a brochure for your business, that exchange of services creates a contract between you. But if you only have a verbal agreement, enforcing this contract will be difficult since you may have no proof the contract existed.
Sometimes a verbal contract is created when one of the people involved does something you've agreed upon. For instance, if you call up a caterer you've hired for an upcoming event and say you'll pay $200 extra if they add shrimp to the salad, and the caterer does so, you are committed to pay the extra charge. You can't refuse to pay later, or you've broken the contract.
If you are asked to sign a contract
Some contracts are quite simple, and if they're written in plain English you can probably make a sound decision on whether or not to sign them. If contracts are long, complicated, or contain a lot of legal language you don't understand, you may want to have an attorney look the contract over before signing.
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