How do I know if I have created a contract?

contracts_agreements What is a contract? A contract is an agreement.

There are four elements to  contract,

#1 One person needs to make an offer.

For example: You offer to create a website in 7 days for $1000 in payment. That is an offer.

#2 The offer needs to be directed at a particular person.

It is not enough for an offer to be general, for example: You post in a Facebook group that you are looking for a VA for 8 hours a week @ $25 an hour. That is not an offer.

#3 The offer must be accepted.

Just because you make an offer to someone doesn’t mean that it is a done deal. That person needs to accept it, by word (“Yes!, it’s a deal”) or by deed (for example paying a deposit).

#4 There must be consideration (or fair exchange).

This means that each person has promised to do something. For example: I purchase an online program for $200 and the seller promises to deliver the services in exchange for my money. That is consideration.

Consideration does not need to be of equal value.

There must be intention to create a legally binding agreement.

This means each party meant to enter into a contract.

What happens if someone is dishonest in the contract formation?

Unfortunately, there are situations where one person may not have entered into a contract if they had known something more about the goods or services, or the seller.

Over the years, some protections have developed about that.

POSSIBLE EXCUSES that negate the contract  (these will depend on where you live). These are “legal” excuses, meaning over time, these have been discussed by judges about why a contract might be void based on the specific facts before them. This can be a complicated discussion, you will need to seek legal advice about how to proceed, but here is a brief summary.

  • Mistake –  If one or both of the parties have a fundamental error in their decision making process based on a mistake then the contract may be void.
  • Undue influence – A contract may be void if there was a power imbalance between the parties and one has abused that power in some way in order to have the contract formed.
  • Misrepresentation – If one party gives inaccurate information that is material to the other party before the contract was made then the contract may be void.  (An example would be - A offered a blue bike but were only selling purple bikes)
  • Capacity - If one or both of parties did not have the “capacity” to enter into a contract (for example, minors do not have capacity, so if a 13 year old agrees to buy a computer game from another 13 year old for $500, that contract would be void)
  • Illegality – If the contract was created for an illegal purpose then it is deemed to be void.
  • Unconscionability – A contract is void if one party took advantage of another’s disability or weakness (age, mental health, drugs/alcohol) - an example is entering into a contract for a service with a person who has dementia.  
Does a contract need to be in writing?

The short answer is no.

The long answer is that depends on whether the law where you live requires written contracts (For example, most places require written contracts for land or insurance)

So, contracts can be made verbally or in writing.

What is the benefit of a written contract?

The benefit of a written contract is that it provides proof in case there is a dispute about the contract and the terms.

How does consumer law affect a contract?

You would need to check the consumer laws in your country but for the most part, consumer laws will just be tightening the regulation in relation to the contract.

For example, in Australia - it is not legal to say there is no refund because consumer law does allow for refunds under certain circumstances.

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