The Requirements of a Valid Business Agreement
When you own or operate a business, you enter agreements every day, with customers, vendors, suppliers, and others. You need to know that the contracts that govern your business dealings are enforceable in a court of law. Here are the basic requirements of a valid and enforceable agreement:
- Agreement—This may seem obvious, but the law requires at least two parties, and mandates both a binding offer and acceptance of that offer.
- Consideration—Under the law, you must give something of value in exchange for a promise, or you must refrain from doing something you have a legal right to do. The consideration may be in cash or in kind, but a gift is not a binding contract.
- Your agreement must be for a legal purpose—The courts will not enforce a contract that, by its terms, requires you or anyone else to break the law.
- Both parties must have legal capacity to create a contract—Both parties must understand that a binding agreement is being created and the terms of that agreement. Three factors may indicate a lack of capacity—age, intoxication, or mental deficiency. As a general rule, persons under the age of 18 may choose to void a contract while still a minor or for a reasonable period of time after becoming a legal adult.
- The parties must enter the agreement voluntarily—A contract may be voidable if one party can show that they entered the contract under duress or undue influence by the other party or that the other party misrepresented a material fact.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide comprehensive business counsel to startups and going concerns. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. We are currently available by phone, text message, or videoconference only. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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