What is Needed for a Contract to Be Legally Binding in Maryland?

Contracts are one of the most important parts of business. Many businesses continue to operate only because they have strong contracts that protect their interests and business. For a contract to be binding, it must meet a few essential elements. Baltimore breach of contract attorney William S. Heyman of the Heyman Law Firm explains the elements a contract must meet to be legally binding in Maryland. If you or your business needs a business advisory lawyer or needs help fighting another business litigation case, contact our law office today to schedule a consultation.

Elements of a Valid Contract in MD

Throughout the country, contract law differs slightly. However, the core elements of a contract must always be met to ensure you have a valid agreement. Note that, as we go through these elements, you will see that there is generally no requirement that the contract be written. While this is not an absolute requirement in all cases, you should always have business contracts in writing.

The essential elements to have a binding contract are as follows:

Offer

One party usually makes an initial offer. While negotiations might go back and forth, there is always a final “offer” that is put out to the other party before the contract is finalized. The offer includes the terms that the offering party will follow, such as a promise to pay money, refrain from competition, or otherwise follow a certain plan or policy. If one party thinks they’re accepting a deal, but there was never actually an offer made, there simply can’t be a contract.

Acceptance

The other side of a contract is acceptance. Once one party puts out the offer, the other party must reach out and accept the offer. If the offer continues to stand unaccepted, there is no contract. When negotiating a contract, the offer may be answered with a counteroffer rather than outright acceptance. In these cases, sides might switch, and it may be confusing as to who created the final offer and who accepted the offer. Regardless of which side makes the offer and which side accepts it, both offer and acceptance must be present to have a contract.

Consideration

“Consideration” is often a confusing legal principle, but it must be present in every contract. Consideration is something of value exchanged as part of the contract. The simplest example of consideration is when one party pays money for the other party’s goods or services. The money and the goods or services each have value, so they are valid consideration.

Contracts become complicated and might be invalid if nothing of value is given or given up as part of the agreement. For example, if the contract is “I will give you $100 in one week,” and the recipient did not do anything or give up anything to get that $100, then there is no consideration and no contract. Consideration might also be missing in cases where someone signs a contract to do something they are already legally obligated to do, such as a contract for a reward for not committing crimes. Lastly, there is no consideration if you agree to do something impossible or something you do not have the right to do (e.g., selling real estate you do not own).

Mutual Obligation

Contracts go both ways; both parties to a contract must be bound to the contract for it to be valid. If one party were able to walk away from the contract, then there wouldn’t be a binding offer, consideration would be meaningless, and the contract would be unenforceable. Because of this, the contract must lock both parties into their obligations under the agreement. There may be options for anticipatory breach or ways for the parties to step away from the contract, but those processes must still bind the parties.

In any contract, the parties can renegotiate terms and sign a new agreement. Sometimes parties form new agreements to set aside an old agreement or to cut business ties, and these are also valid because they affect both sides.

Competence

Both parties to a contract must be willing and able to form the agreement for it to be valid. Minors and people with mental handicaps might not be legally able to enter into a contract, so any contract formed with them is invalid. The same may be true if someone is drunk or drugged when they sign the contract, or if they sign under threats of violence. Lawyers say that both parties must come together and have a “meeting of the minds” for a contract to be valid. Without this, the words of the agreement are meaningless. One interesting situation happens when someone signs a contract in a language that they do not understand. Generally, in the business context, the fact that someone signed a contract is sufficient to be binding on them.

Call Our Baltimore Breach of Contract Lawyers Today

If you are entering into a contract, forming new business ties, or trying to determine whether your contracts are legally binding, call the Heyman Law Firm today. Our Baltimore business litigation attorneys represent small and large businesses alike and work to help our clients form strong contracts and fight to help them navigate complex legal problems. To schedule a consultation with our attorneys, contact the Heyman Law Firm today at (410) 305-9287.