Did you know that an agreement written up by a solicitor isn’t necessarily binding? That is to say, it isn’t the presence of the solicitor that makes the paperwork binding in court, but rather the inclusion of certain characteristics that make it so.
Contracts are legally binding, but they only exist between two parties. They are different to deeds, which can have just one party to be legally binding. For a contract to be binding, these are some of the things that need to be in place.
The requirements of a contract
An agreement must be in place to begin with, and there must be at least two parties to it. One side will make the offer and one or more other parties will accept it. The offer extends a willingness to enter into a contract under certain terms or conditions. It can be made to one person, to a group or to the wider world.
It’s important to know that the offer can be withdrawn before the contract is signed, provided that this withdrawal is communicated to the other parties, by a third party or the offeror themselves. At the point of acceptance, this must be final and unqualified. Usually, it is made in writing.
Counteroffers can be made that change the terms. The original offer will be rejected in that case. The rejected offer cannot be accepted or restored unless it is remade. A counteroffer isn’t in place if the other party is simply asking for more information.
When the accepting party communicates their acceptance of the offer, the contract is then in place. This could apply to a loan agreement, for example, where the offer of a financial loan is being made to another party under a series of binding terms. A solicitor can provide detailed guidance. You can find out more and seek Parachute Law Loan agreement advice for certainty.
How acceptance can be made
Terms can be accepted in a number of ways. For example, there is a postal rule that says acceptance is made when the letter is sent in the post. Other instant methods, such as text or email, are applied at the point of receipt. Some contractual offers define how acceptance can be made and will only take acceptance via that format.
Acceptance cannot be made by a lack of response. It’s also interesting to note that the offer – and its acceptance – doesn’t necessarily have to be made in writing. They can be made verbally and with conduct.
Consideration
In addition to an offer and acceptance, there must be a consideration for the contract to be legal. This means something of value that will be exchanged between the parties. Consideration must have economic value, and be ‘sufficient’. In our loan agreement example earlier, this would be a clearly defined financial sum.
In all cases, it makes sense to secure the services of a lawyer when writing up a contract, to ensure it is enforceable.