What is a contract?
Contracts are legally binding agreements used in borrowing money, obtaining housing, and getting a job. In short, contracts are basic to living in our society. A contract is an agreement between two or more people requiring each person to do something specific. This agreement may also require a person to refrain from doing something that he or she has a right to do. While a contract can be oral or written, it is wise to make only written contracts because an oral contract can be difficult to prove.
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What are the requirements for a contract?
A valid contract must have four elements. Without these four elements, there is no contract:
1. A Meeting of the Minds.
Basic to a contract is a "meeting of the minds." The parties have to understand and express to each other what is expected of each of them. For instance, in a situation in which something is being bought and sold, both the buyer and the seller have to agree on:
The process of making a contract usually begins with one party making an offer. The other party may accept the offer, reject the offer, or make a counteroffer. Making a counteroffer is negotiating.
To create a contract, one person must accept another person's offer or counteroffer. A legally binding contract is formed once an offer or counteroffer is accepted. An offer or counteroffer can only be accepted by the person to whom it is made.
The meeting of the minds necessary for a contract can only occur when the agreement is freely entered into by both parties. If one party is coerced into signing, then their minds have not met. The legal term for being coerced into entering a contract is "duress."
Under Georgia law, duress is defined as:
For example, what if a salesperson has "pressured" you into signing a contract to buy a motorcycle? Could you get out of the contract? Maybe, but if you took the motorcycle home and used it, probably not. Your use of the motorcycle would reinforce your acceptance of the contract.
2. Parties Capable of Contracting
The expression "parties capable of contracting" has a very specific legal meaning. To have a contract, the minds of the parties must meet. For minds to meet, each party must understand what is taking place.
The law regards certain groups of people as incapable of understanding agreements. The mentally incompetent, for example, are considered unable to make a valid contract. The courts could void a contract signed by a mentally incompetent person.
Minors are considered incapable of understanding contract obligations. They are not bound by what they sign. In Georgia, the legal age of majority (the age at which a person is considered to be an adult in contractual situations) is 18 years. Youths under 18 (that is, minors) may not legally enter into contracts.
The law does not allow persons under 18 to enter into contracts. However, the age requirement does not mean that persons can lie about their ages to sign contracts and get the benefits without paying for them. In Georgia, to get out of a contract, a minor usually must return the benefits, if possible.
One kind of minor can enter into contracts under Georgia law. Someone under 18 who is not supported by his or her parents can be legally classified as an emancipated minor. An emancipated minor may enter into contracts for necessities (that is food, clothing, shelter, and education).
3. An Agreement with Obligations
In a contract agreement, both parties-not just one-must have some type of obligation. They must each make some promise to the other. These mutual obligations are called consideration. Without each party agreeing to obligations, no contract exists.
In rare cases, a great variance in obligations may be used as evidence to void a contract. A contract is said to be unconscionable if the terms of the contract are so one-sided that:
An unconscionable contract will not be enforced by the courts. Then the contract could be voidable. That would be particularly true if there were also a great difference between the mental abilities of the two parties.
The consideration does not have to be of equal value on both sides, and it does not have to be money. It can be:
a concrete object or an action,
a promise to do something that someone is not already required to do, or
a promise to keep from doing an activity that someone has a legal right to do.
It is not essential to a contract that the mutual obligations be carried out at the same time. One person may perform his or her obligation immediately. The other person may carry out the obligation at some time in the future.
It is possible to have a contract in which both persons agree to perform in the future. An example would be a contract in which an author agrees to write a textbook and a publisher agrees to publish it and pay the author $5,000 when it is done.
4. A Legal Purpose
Having a legal purpose is as important to a contract as having a meeting of the minds, legally capable parties, and mutual obligations. However, unless prohibited by law, almost any purpose is permissible in our free society. A contract cannot be enforced by law unless its purpose is legally permissible.
Just because a contract does not break a criminal law doesn't mean that it has a legal purpose. A contract is illegal if it:
doesn't comply with a civil statute or
violates constitutional, statutory, administrative, or case law.
For that reason, the contract imposing racial discrimination would be illegal and unenforceable. Governments cannot violate the constitutional rights of individuals to equal protection under the law.
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What are my rights and responsibilities when entering into a contract?
Before you enter into a contract, you have the right to review the terms. If you do not understand the terms, ask someone you trust or an attorney for help. If you do not like the terms of the contract, you have the right to walk away. Because once you enter into a contract, you are responsible for doing what you agreed to in the contract.
Each party to a contract has the right and responsibility to be honest and deal fairly with the other party. The contract will also create other rights and responsibilities for each party. For example, through the contract, you may have the right to buy a product, or the right to receive money for a service you provide.
If the other party doesn’t live up to their side of the agreement, you have the right to sue for breach of contract.
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