A contract is a legally binding agreement between parties to do or not to do something.  Businesses enter into contracts for many reasons, including purchasing supplies, insuring employers or entering into buy/sell agreements.  A business person should have a good understanding of contract law in order to succeed in business.  As an initial matter, there are several factors to consider in order to determine whether a contract has been made.  Once a contract has been created, it must be determined if there are any issues that call into question its validity.  Finally if there has been a breach of the contract, there is a question of whether damages have occurred.

There are three elements that must be present for a contract to exist:  offer, acceptance, and consideration.

1. Offer - The first step to a contract is an offer.  An offer is a written or spoken statement by a party of his or her intention to be held to a commitment upon acceptance of the offer.  Many business owners have become involved in legal disputes because, during negotiations, a customer believed an offer had been made when the business person believed the parties only were discussing possible options.  A business person should carefully consider whether his or her statements or the statements of other parties constitute offers. 
2. Acceptance - The second requirement for a valid contract is acceptance of the offer.  In order for an acceptance of an offer to be effective, it must be made while the offer is still open.  In some situations, the company making the offer gives a definite time frame:  "My company will sell you this computer software for $2,000, but you must decide whether to buy it within two days."  Other ways an offer may end or expire include:  (1) the person making the offer withdraws the offer, (2) the person who receives the offer rejects it, (3) a reasonable amount of time passes after the offer is made, or (4) the subject matter of the offer is destroyed before acceptance.
3. Consideration - Consideration is a legal concept that describes something of value given in exchange for a performance or a promise of performance.  The presence of consideration distinguishes contracts from gifts.  Consideration can be a promise to do something there is no legal obligation to do, or a promise to not do something there is a legal right to do.  Promises to exchange money, goods, or services are forms of consideration.  All parties in an agreement must give consideration in order to create a contract, but courts typically do not make a determination about the adequacy of the consideration unless there is evidence of some type of wrongdoing by the party benefiting most from the contract.

Mandatory Arbitration and Forum Selection

Parties to a contract often agree in advance to arbitrate any disputes arising under the contract rather than going to court.  Arbitration agreements usually specify that each party chooses an arbitrator and the two arbitrators choose a third.  Mandatory arbitration can save time and money, but a business owner may want to have an attorney review the mandatory arbitration clause before signing a contract that includes one.

Parties also may choose to include a forum selection clause in a contract.  A forum election clause stipulates that any legal action stemming from the contract will be brought in a particular court and that a particular jurisdiction's laws will govern.  By including a forum selection clause, a Texas business can ensure that any lawsuit arising under the contract will be brought in a Texas court applying Texas laws, saving the Texas business time and money in the event of a contract dispute.

Are you in need of a legal contract?  If so, you need to call me now.