What is a contract?

UPDATED: Jul 14, 2021

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Jeffrey Johnson

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 14, 2021

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We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

UPDATED: Jul 14, 2021

Advertiser Disclosure

asdfIt’s all about you. We want to help you make the right legal decisions.

We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.

UPDATED: Jul 14, 2021Fact Checked

A contract is an agreement between two or more persons (individuals, businesses, organizations, or government agencies) to do, or to refrain from doing, a particular thing in exchange for something of value. Contracts can generally be written using formal or informal terms, or they can be entirely verbal. If one side fails to live up to his/her/its part of the contract, there’s a “breach” of contract and certain remedies for solving the differences are available. The terms of the contract, meaning, the who, what, where, when, and how of the agreement, define the binding promises of each party to the contract.

Contracts are considered valid the moment that the offer is accepted. For example, if you shake hands and agree to purchase someone’s old TV for $30, you have a valid contract. The contract is complete when you give them the money and they give you the TV. Contracts can be as informal or as formal as the occasion calls for. Although, if you are making a deal for anything that is worth more than $500, it is usually a good idea to have something in writing, just in case something goes wrong with the agreement.

Written contracts must contain the names of both parties, the agreed upon terms, and the parties’ signatures to be valid. An example of a valid contract is: “Luke Luck hereby agrees to sell Ducky Lucky 400 meal worms. Ducky Lucky agrees to pay $20 for the meal worms.

Luke Luck’s Signature and Date

Ducky Lucky’s Signature and Date”

If you are trying to draft a form contract for your business, it would be in your best interest to have a business attorney look over the finished draft. A business attorney can offer feedback as to provisions that can protect both the buyer and seller and ensure that any disputes over contract agreements remain out of court.

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Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

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