The Essentials of a Contract – Part 2
Contracts are crucial for managing many aspects of our everyday lives. From arranging finance to operating a business here in New Jersey, you will need to sign contracts. With that in mind, here are five essentials you need to be aware of in order to ensure a contract is valid. In the first part of this article series, we explored the necessity of the first; parties being competent to contract, but in this article, we will look at the second, that there is a proper subject matter.
As a reminder, the five essentials to make a contract valid and legally binding are:
- That the parties are competent to contract.
- There is a proper subject matter.
- Valid consideration.
- A meeting of the minds.
- Mutual obligations.
Proper subject matter is a crucial part of a contract, and without it, you will have trouble trying to enforce your contract in the event a dispute arises. Unfortunately, this is an area where many people become confused..
Essentially, and in its simplest terms, in order to be valid, a contract needs to state what one party wants and what the other party will provide in return. This area can be challenging as the subject matter needs to be clear, enforceable (i.e. legal), and understandable. It is, ultimately, the entire purpose of the contract, but often poorly worded contracts fail to adequately address this.
The wording of the contract should clearly state what the subject matter or objective of the agreement is for, what actions are allowed or expected by and between the parties, and what the consequences of any failure of the parties to carry out those actions are. Any uncertainties must be removed, and it is almost always best if non-experts in the field are able to understand what the object or purpose of the contract is.
It is also important that the subject matter is “proper.” For example, a valid contract cannot be based on illegal activity. In the event of a dispute between the contracting parties, a court would be unable to enforce the terms of it inasmuch as it is based upon illegal activity. The contract would be void and unenforceable.
Therefore, it is crucial that you check that the subject matter of your contract is legally valid and enforceable.
If you have concerns about ensuring your document is a legally binding contract, be sure that you speak to an experienced legal professional. The team at Adriana Baudry is available to help you and check the details of your contracts before both parties make a final agreement.