If you want to accept someone else's offer, the best approach is to do it as soon as possible, while there's no doubt that the offer is still open. Keep in mind that until you accept, the person or company who made the offer -- called the offeror -- may revoke the offer. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising.
In some states, the information on this website may be considered a lawyer referral service. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice. Meet the Editors. Contracts Make a Legally Valid Contract. All you need is a clear agreement and mutual promises to exchange things of value. Most contracts only need to contain two elements to be legally valid: All parties must be in agreement after an offer has been made by one party and accepted by the other.
Something of value must be exchanged -- such as cash, services, or goods or a promise to exchange such an item -- for something else of value. Agreement Between the Parties Although it may seem like stating the obvious, an essential element of a valid contract is that all parties must agree on all major issues.
Offer and Acceptance The most basic rule of contract law is that a legal contract exists when one party makes an offer and the other party accepts it. When Acceptance Occurs In day-to-day business, the seemingly simple steps of offer and acceptance can become quite convoluted.
Don't leave anything out; if you discuss something verbally and shake on it but it's not in the contract, it will be next to impossible to enforce. In the world of contract law, judges with a few exceptions may only interpret a contract from its "four corners," not from what the parties said to each other. If you forget to include something, you can always create a short written amendment.
Or, if you haven't signed the agreement, you can handwrite the change into the contract. If parties initial the change, it becomes part of the contract. Specify who pays whom, when the payments must be made, and the conditions for making payments.
As you might guess, money is often a contentious issue, so this part should be very detailed. If you're going to pay in installments or only when work is completed to your satisfaction, say so and list dates, times, and requirements.
Consider including the method of payment as well. While some people might be okay with a business check or business charge card, others might want a cashier's check or even cash. It makes sense to set out the circumstances under which the parties can terminate the contract. For instance, if one party misses too many important deadlines, the other party should have the right to terminate the contract without being on the hook legally for breaching violating the agreement.
Write into your agreement what you and the other party will do if something goes wrong. You can decide that you will handle your dispute through arbitration or mediation instead of going to court, which takes up a lot of time and money. If you and the other party are located in different states, you should choose only one of your state's laws to apply to the contract to avoid sticky legal wrangling later.
In addition, you may want to specify where you will mediate, arbitrate, or bring legal actions under the contract. This will simplify your life if a dispute does crop up.
Will you have to pay for supplies and materials in the meantime? The contract should clearly describe all milestones so there are no disputes about when a task is considered complete. This arrangement can be used to cover start-up or one-off costs for the contract such as the purchase of materials.
The hirer will make payments within seven working days of receiving a correct invoice from the contractor. If you work in the building and construction industry, check with your state or territory industry association or government building authority to understand the rules about staging payments. Expenses dealt with in a contract may include items such as meals, travel and photocopying.
The contract should specify whether the hirer will:. A contract may require you to create something, like a software program, a document or a plan for a house. However, the creator of intellectual property IP is not always the owner. The owner will have certain rights called 'intellectual property rights' that allow them to license or sell the creation.
The owner may also be able to stop other people from making money out of it, even the creator. If the hirer wants to own the IP you create, the contract must specifically outline this.
The contract states that the intellectual property rights in any material developed by Lee under the contract will belong to Rekall Ltd. It states that Lee is provided with a licence to use the software only for the purposes of the contract. Lee completes the task, and is very pleased with the software.
If he tries to sell the software to another company, he will be in breach of the intellectual property clause in his contract with Rekall Ltd. This is because the company owns the software, not Lee. To do that, you can include a clause in your contract to protect that information. The contract can also specify the type of information that is confidential so that both parties understand exactly what needs to be protected for example, 'information regarding the contractor's profit margins'.
The hirer will not, without written consent from the contractor, disclose any confidential information of the contractor to a third party. Confidential information includes profit margins and pricing information disclosed in this contract. A contract may include an indemnity clause. In a contracting arrangement, this is usually a promise you make to the hirer to accept the risk of loss or damage that the hirer may suffer as a result of your work.
Indemnity clauses are usually about shifting risk from the hirer to the contractor. For people working in certain professions such as accountants, architects, lawyers or builders , where advice and expertise are central to the performance of the contract, indemnities and indemnity insurance can be a normal part of doing business.
It is important that you understand exactly what responsibility an indemnity clause imposes on you. Professional indemnity insurance is strongly advised for a contract that contains an indemnity clause. Lee develops a software program to assist Rekall Ltd's inventory management. However, the software is faulty and Rekall Ltd loses money when it fails to maintain correct inventories. The contract had an indemnity clause, so Rekall Ltd may be able to recover those losses from Lee.
If Lee has professional indemnity insurance see below , he may be covered for those losses. Many contracts require you to be responsible for maintaining your own insurance. The insurance might be for:. You should make sure that any potential liabilities under a contract are covered by your insurance. Professional indemnity insurance is most often used by contractors who have expertise in a particular service. For example, engineers may have this insurance to cover against their work becoming unsafe.
Medical practitioners may take out cover for protection from being sued if they injure a patient. Sometimes you may need to engage a subcontractor to do a job for you or help you do a job. Make sure to discuss the possibility of subcontracting work with the hirer and include it in the contract. Some hirers allow you to subcontract part, but not all, of the services. The hirer may wish to specify what work may be subcontracted or place other restrictions in the contract.
Alternatively, some hirers insist that you personally do the work and will not allow you to subcontract.
If you do use a subcontractor, you will be responsible for any work performed by them. Remember that if you subcontract the work, you will enter into a contract with the subcontractor as their hirer, even if it is not a written agreement.
One of the benefits of being a contractor is the ability to work on any number of projects for any number of clients. An 'exclusivity' clause restricts you from entering into contracts with other clients. You should carefully consider whether you want to agree to a clause like this. A court may not enforce an exclusivity clause that is too restrictive or unreasonable. The court will consider factors such as whether the clause protects only the genuine interest of the hirer, the period of exclusivity and the geographic area to which the clause applies.
It's best to have the contract clear so you don't need a court to interpret it. This allows you to recover some or all of your costs if the project does not go ahead or is cancelled before you complete the work.
It may be easier to agree on a payment noting the amount in the contract clause. Cost recovery - Where the contractor is engaged by the hirer on an exclusive basis, and the hirer decides that the contractor's services are no longer necessary, the contractor will be entitled to be compensated by the hirer for all reasonable costs incurred by the contractor in relation to those services until that time. A 'restraint of trade' or 'no poaching' clause may be included if the hirer is concerned that you might take their clients or compete with their business during the contract period or for a period of time after the contract ends.
Usually a period is specified during which you cannot trade with the hirer's clients. As with exclusivity clauses, a court will not enforce a restraint of trade clause that is unreasonable.
Also known as a contractual business relationship or an agreement, a contract describes expectations for an interaction. It ensures all parties agree to the terms of their relationship. Contracts are essential to protect your business interests. They define boundaries and solutions to any potential problems and clarify legal liability. Take every contract seriously.
Avoid entering a contract unless you fully understand all parts of it. Make sure you trust the person or business with whom you sign the contract.
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