Contract Formation


Contracts are agreements between persons or legal entities (e.g.  corporations), in which one party agrees to perform a service or provide goods in exchange for the payment of money or other goods or services. The formation of a contract is accomplished when there is an offer and acceptance between the contracting parties.  There must also be a bargained for exchange often referred to as “consideration.”

However, an agreement, even after offer, acceptance, and consideration is not necessarily a legally binding contract. For instance, one cannot contract for an illegal or impossible act. In addition, in order to enter into a legally binding contract, one must have the capacity to enter into that contract.

A binding, legally enforceable contract can be in writing or oral (verbal). Depending on the nature of the transaction involved, certain types of contracts in Florida are required by law to be in writing in order to be enforceable. Generally other than those required by law to be in writing, verbal contracts are enforceable in Florida, especially in situations where one party has performed his or her obligations.

Written contracts often contain legal terms such as "liquidated damages," "special damages," "consequential damages," "court costs,” or ”default" that have meanings that are not generally known to non lawyers. If one party to a legally binding contract breaches the agreement, many of these terms can have a significant effect on the remedies and damages available to the non breaching party. A lawyer can also help you understand what these terms mean and the consequences of a breach. Contracts can also limit rights as to which court a lawsuit may be brought in, whether the parties to the contract are entitled to a jury, the payment of attorney’s fees, and whether a process call mediation is required.

The breaking or "breach" of a contract can result in the breaching party being sued by the other party to enforce the contract. The non breaching party may elect to compel the breaching party to specifically perform the act called for by the contract, or to pay money instead of performing the act. If a party wants to enforce a written contract, the party is required by law to file the lawsuit within usually five years of the date the written contract was made, or four years if it is a verbal contract. However, the deadline for filing suit may be as little as one year after the agreement was made. If you do not sue within the deadline, you will not be permitted to sue later. A lawyer can help you determine what that deadline is for enforcing the contract by filing a lawsuit. In addition, the time frame for filing suit can be extended based upon certain actions of the parties during the contract such as continued payment.

Each year, Florida residents lose money because they do not understand contracts when they enter into them or what to do when the other side breaches the agreement. In many of these cases, the advice of a lawyer would have prevented the loss of money. Only a qualified lawyer can advise you on whether an agreement is binding upon you and what rights or obligations you may have if there is a breach. Before you enter an agreement requiring the giving or payment of valuable consideration, it is best to have a qualified lawyer review the agreement, explain your obligations under it, and the consequence of a breach of the agreement. Never sign anything that you do not read and understand.

For more information regarding contract formation, contact us at (386) 257-1222.

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