Because there are several state and federal laws that apply to legal contracts, you should always consider getting personalized legal advice before entering one. Speak with an Arkansas attorney to help you make decisions and draft lawful contracts. Your contract lawyer will consider any future financial and civil implications of the contract and make sure you don’t make costly legal mistakes.
What Are the 5 Essential Elements of a Contract?
The five essential elements of a contract in Arkansas are the offer, acceptance, consideration, mutual obligation, and capacity of each party.
Contracts are formed when one party accepts an offer from another. There must be clear language in the contract that distinguishes between negotiations and a formalized relationship.
An offer can be made to a person, business, or organization. It should also demonstrate a binding promise to provide the services or products as described in the contract.
Your contract should also include acceptance information. Generally, you can accomplish this by inserting a statement of acceptance in the contract. This statement should be a clear, unambiguous acknowledgment that the relationship is legally binding and will commence according to the terms and conditions contained within the contract. Otherwise, the contract could be invalidated.
Consideration is the exchange of value between two or more parties. Typically, one person is offering something of value to another in exchange for its equivalent, such as cash or property. As long as an exchange occurs, it meets this requirement of a contract.
Consideration does not always have to be a physical, tangible item: sometimes, the consideration is a right, detriment, benefit, or undertaking assumed by one party or the other.
4. Mutual Obligation
Mutual obligation is a binding agreement by the parties regarding the terms and conditions of consideration. For a contract to be enforceable, all parties must provide some sort of mutual obligation. A court could invalidate a contract if this element has not been met by one side. For example, if one party cancels the contract at a certain point, they may get in legal trouble for not meeting their part of the agreement.
5. Competency & Capacity
Only competent and legally authorized individuals should enter into a contract. In general, minor-aged children, people with a limited mental capacity, and intoxicated individuals do not have the competency and capacity to enter into a legal contract. A judge may invalidate a contract if one of the parties is not competent.
You might not be able to enter into a contract with specific individuals unless their guardians, agents, or powers of attorney agree to it. In addition, a person signing a contract on behalf of a company must have the authorization and capacity to do so.
Business Contract Writing Tips
Anyone can draft a business contract, but they must follow the laws that make a contract enforceable. Making mistakes when writing business contracts can lead to legal problems in the future.
Here are some tips to help you write a legal contract:
Tip #1: Keep Your Business Contracts as Simple as Necessary
A business contract with fancy legal language, or “legalese,” does not necessarily make it any better than one that uses simple wording. In fact, it’s preferable to use straightforward language because it makes it much easier for both parties to find and understand critical information. Try to structure your contract using headers and bullet points to make things as clear as possible and prevent potential misunderstandings.
Tip #2: Identify Each Party Accurately
While it may seem easy to identify the parties of a contract, there may be more to the relationship than meets the eye. For example, if you are contracting with a business, make sure that you identify the business in the contract instead of a manager or owner. Naming the wrong party can leave you on the hook for someone else’s liabilities.
Tip #3: Don’t Leave Out Relevant Details
The main purpose of a business contract is to clearly define the scope and depth of the agreement. You should not leave out important details, especially ones related to expectation and delivery. In other words, don’t assume that something is obvious when writing your business contracts. When in doubt, spell it out!
Tip #4: Get Help from an Arkansas Business Contract Lawyer
While there are online templates available for business contracts, keep in mind that they aren’t guaranteed to address everything you need to mention in your contract. Online contracts may save you money for now, but they could end up costing you thousands of dollars if they don’t hold up to legal scrutiny in the future. Consider hiring an Arkansas business contract lawyer instead to make sure all your bases are covered.
An Arkansas business contract lawyer can:
- Ensure the contract is legally enforceable and valid
- Identify potential liability issues and resolve them beforehand
- Prevent legal mistakes under Arkansas and federal contract laws
- Provide insight and offer suggestions to improve your contract
- Represent you if a breach of contract issue arises
- Protect your rights throughout the duration of your business relationships