You might have read the title of this piece and thought it was a silly question. Because, if contracts weren’t legally binding, why would anyone send them? And even though the answer might seem obvious, contracts can be confusing, and it is normal to have questions about them. So today, we wanted to help you understand the elements of a contract, whether contracts are legally binding as well as what makes a contract legally binding—all so you can feel confident about yours.
Before we dive into answering the question “Are contracts legally binding?” we wanted to refresh your memory on what should be in a contract in the first place. And, generally speaking, a contract must contain four main elements for it to be legally binding.
- First, there must be an offer. This is an agreement made between two parties (typically you as the service provider or business owner and a client or customer) that explains what each party will do in exchange for something else (which is to provide a good or service for a certain amount of money).
- Second, a contract needs to include something called consideration. This is the value each side is exchanging for the offer.
- Next, we have acceptance. The offeree (your client or customer) must accept the offer in order for it to become a legally binding contract.
- And finally, an intention to create legal relations: both parties must agree that they are entering into a legally binding contract and intend to be held to the terms of their agreement.
Each of these elements should be in your contract and show up in different sections of it. And, if you’re nervous about whether your contract has everything it needs to, we love Legally Set and Your Legal BFF for contract templates.
Are contracts legally binding?
Now that we’re covered the elements of a contract, let’s answer the question at hand: Are contracts legally binding? The short answer is yes—if all four elements from above are present, and the contract is signed, then a contract is legally binding. This means the parties involved must uphold their part of the agreement and should any one fail to do so, they may be liable for breach of contract—which can result in serious legal consequences.
What makes contracts legally binding?
Even though we’re all on the same page about what needs to be in a contract to make it legally binding, you still might be wondering what really makes a contract legally binding? Because, sure, you might have all 4 elements in your contract, but what is it that lawyers would say if they were to answer this question. And if we’re allowed to put a few words in their proverbial mouths, it would be the mutual understanding of both parties and their intention to enter a legally binding agreement that makes a contract legally binding.
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