4 important things to look for in a contract

Business agreements are often summed up in contract or commercial agreements, as they can at times be referred to.

There are a number of things to look for in a contract since these agreements are legally binding and the parties can use this fact to minimize their risks.

Before looking at the things to look for in a contract you first need to know what exactly a contract is and how they are formed

What is a contract?

A contract is a binding agreement or promise between parties which is enforceable by the law.

According to Sir William Anson, “A contract is an agreement enforceable at law made between two or more persons, by which rights are acquired by one or more to acts or forbearances on the part of the other or others.

Contracts form a key feature in the day-to-day life from purchasing airtime for a phone to boarding a bus to work, all these constitute contracts.

The “legally binding aspect” is the key difference between a contract and other social agreement.

How are contracts formed?

Contract start with negotiations or some form of communication between the parties, in this case, the buyer and the seller.

Remember you have to know when to walk away from negotiations because you may end up in a contract that doesn’t favour you.

To form a contract one party has to make an offer and the other party has to accept that offer. It is important to learn how to make offers. Remember acceptance of an offer results into a contract hence the need to ensure you understand every part of that offer.

Both parties have to provide consideration. What is consideration in contracts? This is a price one pays in a contract for example in a contract to buy or sell a car, the buyer loses money and the seller loses the car. Both parties pay a price.

The final assumption is that both parties have a capacity to contract and intend for legal consequences to follow.

Things to look for in a contract

Things to look for in a contract will include the following 4 things.

Is there a contract in existence?

The answer to this will depend on whether the essentials of a valid contract have been adhered to. In this case you look for things like valid offer, acceptance, consideration, legality. You also have to ensure that no party has been forced into the contract because that can result into a vitiating factor or element in the contract

Is the agreement one which the law should recognize and enforce?

Some contracts will be valid, void or voidable. This is to say that they will be enforceable, not enforceable or whose being enforced depends on the parties involved, all of which depend on if there exist some factors (vitiating) undermining them.

Things like misrepresentations, mistakes, duress, undue influence and illegality can affect the enforcement of your contract

When do the obligations of the parties come to an end?

This entails termination of a contract the most common and effective way being when the duties and obligations have been carried out. It is worth noting that there are other ways of ending contracts for instance, agreement to end the contract, frustration of the contract (force majeure), breach of a contract and operation of the law, will terminate the contract.

What remedies are available for the injured party if the other party fails to meet its contractual obligations?

Possible remedies include the right to terminate all obligations under the contract and monetary compensation for the loss suffered as a result of the failure (damages).

Conclusion 

The law of contract is concerned with the above questions which is why when you get in a contract you have to know the 4 things to look for in a contract otherwise you risk getting in a void contract.