For example, you may say to your neighbor, “I’d like to sell you my 2010 pontoon boat for $5,000. I am willing to finance it for you if you pay me $1000 per month for 5 months. ” The offer is made orally, there is a commitment (to give the boat to your neighbor in exchange for money), and definite terms (an exact boat and dollar amount are named. ) An offer has to be considered fair by both parties to be considered valid. [2] X Research source This may also be referred to as a “good faith” offer. Fairness is a tricky concept in contracts, but in general, it presumes that both parties will not manipulate the other or try to bend or break the terms through shifty tactics or twisting wording. [3] X Research source
For example, if your neighbor agrees to buy your boat, her consideration is giving you money. Your consideration is surrendering the boat in exchange for that money. The consideration is fair, in this case, if the value of the boat is close to the price that is being asked. A fair offer will not provide conditions that are unlikely or impossible to meet. For example, you wouldn’t want to stipulate that your neighbor must pay you $1000 per month, in $1 bills, for 5 months. While this is technically legal if your neighbor agrees to it, it places an unusual burden on her and may not hold up if the contract is challenged later.
For example, your neighbor may agree that she wants to buy the boat, but she might want you to finance it by accepting $500 per month for 10 months instead. This does not constitute an acceptance of your offer, but a new counter-offer, which you can now choose to accept or decline.
Taking notes can also help you when you draw up the written contract. You won’t have to rely on your memory of the terms because they will all be written down.
All states determine that some contracts fall within the “statute of frauds. " Contracts involving land or real estate, contracts by an executor of a will to pay the debts of an estate, contracts for goods over a certain amount (usually $500), and contracts that will last longer than one year must be put in writing. [9] X Research source [10] X Trustworthy Source National Paralegal College Law Shelf Online education resource from the National Paralegal College Go to source There is no concrete, presentable evidence of a verbal or oral contract. If you and the other party later disagree on what the terms of the contract were, neither of you will have proof that your opinion is correct. Courts find it incredibly difficult to rule on verbal contracts. For this reason, any contract involving important, expensive, or time-consuming consideration should be written.
For example, you might have a “Sales Contract” for the sale of your boat to your neighbor. You will need to specify the buyer, Jane Smith, and the seller, John Henry, in the beginning of the contract. If you have a recurring contract, such as for your photography business, you may wish to identify a shorthand representation such as “photographer” and “client. ” You would say, in this case, Jane Smith (hereafter “photographer”) and Robin Jones (hereafter “client”) the first time the names are introduced. In the remainder of the document, you can provide “photographer” and “client” rather than specific names.
You may also want to provide specific details about what will happen if the expected exchange is not upheld completely. In particular, consider whether there will be “damages,” or remedies for what happens if the contract is breached. [13] X Research source There are several types of damages, and they are appropriate for different situations. Liquidated damages are penalties instituted if the contract is breached. For example, if your neighbor buys your boat but is late with one of the payments, a liquidated damages clause could state that she will have to pay an additional amount of money for each week the payment is late. You have to be careful with these types of clauses; courts may not want to enforce clauses that seem too much like a punishment. [14] X Research source A late fee is likely to be considered a reasonable liquidated damage; requiring your neighbor to return the boat regardless of how much they have already paid you is likely to be considered overly punitive. Consequential damages are indirectly the result of the breached contract. They are often difficult to recover. [15] X Research source If the contract deals with something very expensive or time-consuming, you may wish to include a statement that disputes will be resolved through arbitration or a court proceeding. For example, if you are selling your boat to your neighbor, you should specify the make, model, and year of the boat as well as the name of the boat (if it has one) and a serial number if possible. You should also include the exact dollar amount and the terms of the payment. For example, you may specify that your neighbor will pay you $500 per month for 10 months until the $5000 payment is made.
For example, a rental agreement may specify that the renter may terminate her lease early by giving 30 days notice and paying a fee.
For example, you may put in a contract that your neighbor is going to take possession of your boat upon the first payment, to be made on or before June 1, 2015. She will then pay $500 on the first day of each subsequent month until the full $5000 payment has been reached, on or before April 1, 2016. If the contract is for the sale of goods or property, provide a clear, fully detailed description. [16] X Research source For example: “Jane Smith agrees to purchase a white 2010 twenty-foot pontoon boat from John Henry. "
You may want to have a notary (or at least a 3rd party witness) witness the signatures and sign the document. Even if this is not a requirement for your contract, it could come in handy if one party later claims that the document was forged or modified. Witnesses or notaries are normally required for wills, deeds, mortgages, and marriage contracts, depending upon state law. [17] X Research source
Some states allow minors to enter contracts with an adult co-signer, and some states may allow emancipated minors to sign their own contracts. Being of sound mind when entering a contract means that a person cannot be legally bound to a contract if she is intoxicated or otherwise impaired.
For example, you cannot contract someone into prostitution services in a state in which prostitution is illegal. Similarly, you cannot have a contract involving the sale of an illegal substance, such as drugs.
For example, you cannot enter into a contract to sell your boat to your neighbor if you are not the rightful owner of the boat. Claiming that the boat is yours when it isn’t constitutes fraud, and will void the contract altogether.
