As a business owner, you shouldn’t just shake hands on a business deal and assume you’re good to go. In Michigan, contracts must meet very specific requirements to be legally enforceable. Understanding what these elements are can save your business from potential breach of agreements and costly disputes.
The starting point of every contract
An offer is the first element in every contract you create. When you present a proposal to a client or a vendor, you must include very specific terms that you want to include in the agreement.
Thus, your contract should contain terms that the other party could easily say yes or no to. Michigan courts require contracts to be this specific and clear so that it outlines exactly what you and the other party are committing to when you execute the contract.
Acceptance of the terms
The next element of a legally binding contract is acceptance. You accept a contract when you agree to an offer without any form of modifications. However, if you propose changes in the original offer before agreeing to it, then that creates a counter offer rather than an acceptance.
Additionally, you cannot assume that silence means yes in accepting a contract. The other party you’re getting into agreement with should clearly communicate their acceptance through words or actions. Thus, you must first secure the clear and unambiguous acceptance of the other party before executing a deal.
Commitment required from each party
After you and the other party to the contract agree that the terms offered are acceptable, you now begin the exchange of services. This part of the process is called consideration.
Considerations ensure that your contracts are actionable rather than just mere promises. Here, you outline what you both offer in exchange for what the other party offers. For example, you might offer money in exchange for services from the other party.
This element keeps your contracts from being one-sided promises that hold no weight. A clear exchange between you and the other party ensures that both of you have real stakes in the agreement and a motivation to see it through.
Legality of the deal
However, even when you have a clear offer, acceptance and consideration, your contracts still need legality. This element ensures your agreement is both lawful and involves people who can legally enter into contracts.
Not only should your contracts follow all laws, but you also cannot create contracts that serve illegal purposes. Thus, you cannot enter into agreements that break laws or violate public policies.
Lastly, you must verify that all parties to your contract are of legal age and are of sound mind. Hence, minors, people with mental disabilities and those who are under the influence of alcohol or substances cannot legally enter into a contract.
Protect your business through proper contracts
These four elements work together to create legally actionable agreements. If you’re serious about executing air tight contracts, consider getting in touch with legal professionals who understand contract law. They can help protect your business and ensure that you have all your bases covered when you conduct business in Michigan.