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What are the basics of forming a contract?

People in the construction industry know that many of the most important deals that they ever make are based primarily upon a handshake. Trust is the foundation of success in the California construction industry and even though most people would never intentionally put that trust or their reputation in question, a deal that simply sealed by a handshake leaves a lot to be desired, in that it leaves open a lot of questions that could become the basis for a lawsuit.

Nobody wants to allocate time and money towards attorney’s fees and court costs when that money could be going toward the next business venture, so making sure that there is adequate language in every business contract is absolutely essential for California business owners.

Contract disputes are relatively common in the construction business, but it’s how they are handled that can make all the difference between success and failure. If evidence of the agreement is lacking or if the terms of the contract aren’t clear, then proving your side of the argument can be difficult, if not impossible. The less concrete evidence there is of a contract and its terms, the less likelihood there is of reaching a favorable resolution. For these reasons, every handshake deal should be followed up with a well-written and mutually agreed-upon business contract to document the terms of the deal.

A contract at its most basic requires three things. First, the contract terms must be clear enough to allow the parties to understand their respective duties and other requirements. Second, the contract must require that the parties give each other something of value. Finally, the parties must have agreed to the terms of the contract. In other words, the contract was clear enough and specific enough to be enforceable, the contract was of some value to each party and each party specifically agreed to its terms, as generally signified by their signatures.

Not every business contract has to be terribly complicated, but it does have to be specific enough to provide evidence that both parties knew what they were getting into. Taking the step of drawing up a binding and legally sufficient contract is something that nobody should take for granted, no matter how large or small the deal at hand.

Source: Judicial Counsel of California, Civil Jury Instructions, accessed March 23, 2015