WHAT IS A CONTRACT AND HOW TO DRAFT A GOOD ONE

DISCLAIMER: Altiorem Legal Services (hereinafter referred to as “Altiorem”) cannot and does not provide legal advice. Altiorem is not a law firm; Altiorem’s staff are not attorneys, cannot act as attorneys, and do not act as attorneys; and any information provided by Altiorem in this article or otherwise is not a substitute for legal advice from an attorney. The information contained in this article should not be construed as legal advice, as it is not intended to be legal advice; the information in this article is provided for educational purposes only. Again, none of the information provided in this article should be construed as legal advice, and nobody should rely on or use the information contained in this article in one’s legal matters.

WHAT IS A CONTRACT?

A contract is an agreement between two or more parties creating mutual rights and duties enforceable by law.[1]

Contracts are essentially promises between parties that the law will enforce.

With a few exceptions, noted below. an enforceable contract can be either written or oral or a mixture of both.[2]

Courts regularly enforce oral contracts that were never reduced to writing or signed by either party.

In the case of oral contracts, the Courts will typically look for indications that the parties to the agreement demonstrated an intention to be bound by the terms of the oral contract. Examples of an expression of this intent could include a handshake, an email, a text message, or even the course of conduct between the parties—for example, if one party paid the other party the agreed upon amount or either party began fulfilling the terms of the contract without having put it on paper yet.

According to Utah Code §§ 25-5-4 and 70A-2-201, there are certain agreements that are void unless written and signed—these statutes requiring certain contracts listed to be in writing to be enforceable is referred to by lawyers and the Court as the “statute of frauds.”[3]

According to Utah Code § 25-5-4, agreements that must be in writing to be enforceable include:

• any agreement that by its terms is not to be performed within one year from the making of the agreement;
• every promise to answer for the debt, default, or miscarriage of another;
• every agreement, promise, or undertaking made upon consideration of marriage, except mutual promises to marry;
• every special promise made by an executor or administrator to answer in damages for the liabilities, or to pay the debts, of the testator or in intestate out of his own estate;
• every agreement authorizing or employing an agent or broker to purchase or sell real estate for compensation; and
• every credit agreement.[4]

Additionally, under the terms of the Uniform Commercial Code (hereinafter referred to as the “UCC”) that was codified into Utah’s statute as Utah Code § 70A-2-201, it states that there are other types of agreements for the sale of goods that are required to be in writing; this is known as the UCC’s “statute of frauds.”[5]

A contract for the sale of goods for the price of $500.00 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.[6]

There are a few elements included in a contract that are required to make it legally enforceable. These elements include:

• mutual assent expressed by a valid offer and acceptance;
• adequate consideration;
• capacity; and
• [7]

For a contract to be binding and enforceable, both parties to the contract must express their “mutual assent” or the “intent to be bound.”[8]

In practical terms, this means that there needs to be some evidence that the parties to the contract were aware of the contract and agreed to be bound by its terms.

This evidence of mutual assent usually comes in the form of an “offer” from one party and an “acceptance” by the other party.

Think of asking a contractor to provide you with a bid for some work at your home—typically, the contractor will provide you a bid for services, which is considered an “offer.” After reviewing the bid, you will accept the bid by signing the bid or by letting the contractor know that you accept and authorize them to proceed, or by providing a down payment for the offered work.

To create a contract, what the parties have promised to do for each other has to be spelled well enough that they can tell what it is they have each promised to do for the other. If the terms are too indefinite or ambiguous, then there is not an enforceable contract.[9]

For a written contract, acceptance is typically manifested by the signatures of the parties on the written contract document.

For oral contracts, the manifestation of mutual assent and acceptance can be a handshake, performance of the contract terms by one or both of the parties, or assent communicated by means of an email or text message.

“Consideration” is a legal term that refers to the “exchange of value” between the contracting parties.[10] In other words, for the contract to be enforceable, each party must give up something of value. The easiest example of this is a service contract, in which one party promises to provide a service and the receiving party promises to pay for the service. These promises to provide and exchange value (i.e., money for services) forms the consideration for the services contract.

“Capacity” refers to the legal ability to enter into a contract.[11] Children under the age of 18 do not have the legal capacity to enter a contract.[12]

Only authorized individuals have the legal capacity to enter into contracts on behalf of a legal entity like a limited liability company or corporation.

Individuals who are not able to manage their legal affairs due to a medical condition, mental deficiency, disability, or injury may not have the capacity to enter into an enforceable contract.

“Legality” refers to the subject matter of the contract. One cannot enter a contract that has an illegal purpose and expect that contract to be legally enforceable. As an extreme example, one could enter into a contract to have someone physically harmed; however, since it is illegal to have someone physically harmed, the subject matter of the contract is illegal and, therefore, unenforceable.

Drafting one’s own contract may seem like an easy thing to do, but without proper legal knowledge, one may find oneself executing a contract that is inadequate.

Altiorem has the proper knowledge required to draft a contract that includes everything you need!

WHAT MAKES A GOOD CONTRACT?

There are a few tips that one can follow to make a bad contract good. These things include using clear, simple, businesslike language; not using overly long sentences; and implementing clearly structured lists that lay out the terms of the contract clearly.

The contract drafter wants to make sure to use clear, simple, businesslike language, to not overcomplicate a contract.

Contracts can already be complicated and do not need the overuse of long and confusing wording.

If the contract drafter must use technical terms, they should define them. This way, nothing can be misconstrued, and the contract would be clear.

Not using overly long sentences goes hand in hand with keeping the contract from getting confusing.

Simple sentences that are clear and to the point are important. Again, this will avoid more confusion in the long run.

If the contract drafter has long sentences in their contract, they run the risk of the reader having trouble following along. Clearly structured lists keep the contract concise.

The contract drafter wants the lists in their contracts to aid in giving a full picture of the agreement, not muddle the facts.

A contract needs to state what the contract is for, what the agreement entails, and for how long the agreement is valid.

The most important key to a good contract is simplicity. By keeping a contract simple, the contract drafter will avoid confusion later down the road.

Whether one is selling a house on their own, creating a contract for an employee, or creating a contract for one’s customers, a clear, concise contract is necessary.

Altiorem can provide clear, concise contracts that are neither confusing nor plagued with “legalese.” Altiorem will strive to get a clear understanding of what the contract needs to contain, and will keep the client informed at all times of the progress being made.

CONTACT US TODAY!

Are you in need of affordable, top-quality legal services from a paralegal? Specifically, do you need help with drafting a contract? Let Altiorem help you today!

We are knowledgeable, skilled, and experienced in the process of creating contracts, and in drafting all manner of legal documents, such as briefs, pleadings, motions, memoranda, letters, etc.

If you need a top-quality, professional, well-written, well researched, and compelling legal document drafted, such as a contract, then look no further!

The quality of our legal documents goes well above and beyond the average legal industry writing quality in Utah; we produce top-quality, properly written legal documents with impeccable grammar, punctuation, spelling, structure, flow, information, compelling legal arguments, and persuasive legal conclusions.

Our team of paralegals are highly experienced in working with attorneys, other paralegals, and court personnel.

We are happy to receive documents via email from you, speak with you on the phone, look through court files, or even translate documents (English / Spanish)!

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[1] See Wex Definitions Team, Contract, https://www.law.cornell.edu/wex/contract (last updated July 2022).

[2] See Glacier Land Co., LLC v. Claudia Klawe & Associates, LLC, 2006 UT App 516, 154 P.3d 852.

[3] Utah Code §§ 25-5-4 and 70A-2-201.

[4] See Utah Code § 25-5-4.

[5] See Utah Code § 70A-2-201.

[6] See id.

[7] Team, supra.

[8] Jaramillo v. Farmers Ins. Group, 669 P.2d 1231 (Utah 1983).

[9] See Golden Key Realty, Inc. v. Mantas, 699 P.2d 730 (Utah 1985).

[10] See Restatement (Second) of Contracts § 71 (1979).

[11] See John Call Engineering v. Manti City Corp., 743 P.2d 1205 (Utah 1987).

[12] See Utah Code § 15-2-1.