Contracts

A contract is an enforceable oral or written agreement between two or more people. It is formed when there is an offer and acceptance between the contracting parties and an exchange of “consideration,” meaning anything of value. As an adult, you enter into contracts regularly: employment contracts, school loans, house or car purchases, installment loan contracts for purchases such as televisions, cell phones, and computers, rental contracts, insurance contracts, contracts for services, and credit card agreements.

Capacity and Minors

With a few exceptions, contracts entered into by minors are not enforceable and may be rescinded by the minor. However, contracts of necessity, such as those for food or shelter, are typically binding despite having been entered into by a minor. Minors may also be able to enter contracts for educational purposes or, in some circumstances, under the “Home, Farm and Business Loans Act.” Contracts made by minors for artistic or creative services or for professional sports may be approved by a court. Once a minor marries, contracts entered into by the minor are enforceable even though the minor has not yet reached the age of majority.

When a Contract Must Be in Writing

A contract does not always have to be in writing. However, if the contract is for your payment of another person’s debt, if it concerns real estate, if it lasts more than one year, or if it transfers property after death (such as a will), it must be in a signed writing. Written contracts are useful because, if a problem arises, they offer proof of the agreed-upon terms and conditions between the parties, which may be beneficial in a court of law. With some exceptions, a court may not accept evidence about oral terms of a contract if there is a written contract that is complete on its face. Parties are presumed to know the terms and conditions of a contract and their responsibilities when they sign it, so you should never sign a contract or other legal document without understanding what it means.

Signing a Contract

Before signing, read the contract carefully and make sure you understand all of it. Cross out any parts that are not what you agreed to and write in the parts of the agreement you want that do not appear in the written contract. Initial the changes and have the other party do the same to indicate agreement to the terms. Do not sign a contract with any blank space on it. Make sure the other party signs the contract, and get a copy of the fully executed contract for your records.

Consequences of Breach

If you fail to honor your obligations or miss payments without a legal basis to do so, you can be sued. You will be given a chance to defend yourself, and the court will then determine whether the claim brought against you is valid under the circumstances. If it is valid, you may have to pay money, perform certain obligations, or refrain from doing other acts for breaching the contract, depending on what is provided for in the contract and by applicable law.