The Anatomy of a Contract

When entering into any contract, all parties must be mentally competent, at least 18 years of age and must have the legal power to enter into the agreement as well as carry out the terms of the agreement.

There are two essential parts that make a contract legally binding: An agreement (a meeting of the minds) and consideration (the exchange of things of value).Within these two components, there are other parts adding to the legality of the contract including the offer, performance, terms, conditions, obligations, payment terms, liability, counter-offers and clauses for breach of contract, which will be listed later in this article.

With few exceptions, for instance, the sale of real estate and tasks that cannot be completed in one year, contracts do not have to be written. If all elements of a contract exist, the contract is legally binding, whether it is written, oral, or an online or “E-contract.” Each state has its own legal requirements and it is wise to consult these to find the specific regulations that pertain to any contract you are considering entering into.

All contracts pertaining to construction should include the following:

• Names and addresses of all parties involved and contractor’s license number
• An approximate timetable for starting and finishing the job
• Names of subcontractors
• The scope of work to be done
• The location where the work is to be performed
• Clear financial terms of payment including total cost and when payments are due
• Specifications of materials and equipment needed, demolition and cleanup provisions
• Brand names (if possible) of all products, appliances and fixtures to be used, as well as colors used
• Who will be responsible for obtaining building permits
• Guarantees
• Conditions for termination of the agreement, arbitration and who is responsible for legal fees in the case of a breach of contract
• Signature lines and the date the contract is signed

No essential term may be left for future agreement!

Contractors should include addendums for what isn’t included. This is especially important when the homeowner assumes existing wiring and plumbing are adequate, sub flooring is sound, baseboard and window trim can be reused, etc.

All changes to the original contract must be made in writing, signed, dated and retained by both parties.

Maggie, customer service
www.contractorexam.com