What are Contracts?

In short, a contract is a promise or a set of promises that are enforceable by law.  Contracts are generally governed by common law, although contracts for the sale of goods are governed by the Uniform Commercial Code (“U.C.C.).  If you have a contract question that involves the sale of goods, the U.C.C. can provide the necessary guidance.

Is My Contract Enforceable?

There are three essential requirements for an agreement to be enforced as a contract. These are an offer, acceptance, and consideration. All three must be present in order to ensure that the contract is enforceable. If any one of these requirements is missing, the validity of the contract could be questioned.

  • Offer: There must be an offer, that is a willingness of the person making the offer (the “offeror”) to exchange something for something in return, such as payment of money in exchange for services.  Some examples of language that might indicate an offer is being made are “I promise” or “I offer.”  The offeror may cancel an offer at anytime prior to acceptance.
  • Acceptance: An acceptance is an agreement to be bound by the terms of an offer.  Generally, the acceptance must mirror the terms of the offer.  If the person accepting the offer (the “offeree”) modifies, removes or add terms to the offer, it acts as a rejection of the original offer and a counteroffer by the offeree.  Acceptance of an offer is typically shown by signature on the contract document.
  • Consideration: All contracts require that the parties exchange something of value as part of the offer.  Consideration can money, labor, time, a combination thereof, or anything else of value.  In general, courts do not question whether the consideration was adequate, meaning that if the parties exchange something of value, courts will not question whether it was valuable enough to be bargained for.
  • What is Not Consideration:
    • Preexisting duty – promising to do something (or not do something) that is a preexisting legal duty (e.g., police cannot separately contract to respond faster to emergency calls)
    • Past consideration – promising to do something that has already been done (e.g., painting your neighbor’s house then offering to paint your neighbor’s house in exchange for money)
    • Illusory contracts – Only one party is required to perform (e.g., A promises B that if B paints his house, A will pay him $100 if he likes the final product)

Statute of Frauds

The law requires that certain contract must be in writing in order to be enforceable.  Those contracts are:

  • Contracts for which the consideration is marriage
  • Contracts that creating an interest in land
  • Contracts that will require more than a year to complete
  • Contracts involving the sale of goods for $500 or more
  • Contracts involving personal promises made by executor or administrator to an estate
  • Contracts to pay the debt of another

If these types of contracts are not in writing, the courts may decline to enforce them.

Verbal Contracts May Not Be Binding

When a dispute arises over a verbal contract, it is often more difficult to resolve. Verbal contracts should be avoided because they cannot be easily reviewed. Therefore, each party may recall the contract with a different meeting. If the contract is not considered legally binding, it is as though it did not exist. If you must make a verbal agreement, follow it up with written communication that explains the deal.

Contracts can be extremely complex. It is advisable to have a contract drafted or reviewed by a qualified attorney before signing it. Call the legal team at Udall Shumway PLC to schedule a consultation.

This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Contracts, or any other litigation matters, please feel free to contact Charles W. Brown at 480.461.5357, or log on to udallshumway.com,  or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.