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Understanding the basic requirements of a valid business contract

California business owners may be interested in a refresher of some contract law basics. Failing to meet certain requirements when signing contracts could lead to them being found unenforceable. For business owners and entrepreneurs, signing business contracts can be a daily occurrence. Contract disputes can arise when the other party fails to hold up their end of the bargain. In those cases, it can be helpful to go back to basics and understand what makes a contract valid under the law. In order for a contract to be binding and enforceable on the parties, certain elements must be contained therein.

The parties must be identified and must be able to contract. This is generally true of everyone except minors and those who are not mentally sound. In addition, the contract should list a lawful and definite object of the contract. This means the thing that the parties are agreeing on cannot be illegal.

Consent usually consists of an offer and an acceptance of that offer. The offer and acceptance must be made voluntarily and there must be a meeting of the minds. This means that both parties must have the same understanding of the contract. Lastly, there must be consideration, means that each party must stand to gain something from the contract. Promising to do something with nothing in return does not generally make that promise enforceable.

An attorney who has experience with these matters can help ensure that a business client's contracts are valid and that they are given legal protection in a breach of contract action. The attorney may also be useful in bringing a legal action in court in cases where there is a material breach by another party.

Source: Entrepreneur magazine, "Is This Contract Valid?", Jeffrey Steinberger, Feb. 27, 2007

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Long Beach, CA 90802-4306

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