CONTRACTS FAQ (FREQUENTLY ASKED QUESTIONS)

Q: Is there anything that must be present in every contract?

A: Yes. Regardless of the type of contract or the specific terms, every contract requires an offer,
an acceptance, competent parties, and consideration. In this context competent means that all
parties to the contract understand the legally binding effect of signing a contract. Consideration
is the legal term for an exchange of goods or services between the parties. For example, if you
offer to sell shoes to someone for $50, the consideration is shoes by one party and money by
the other party.

Q: Do all contracts need to be in writing to be valid?

A: No. Contracts can be written or oral, unless it falls into a specific category of contracts. Most
states require the following contracts to be in writing: marriage, real estate, contracts that take
longer than 1 year to complete, sale of goods for $500 or more, and contracts involving a
person's real estate.

Q: Why is it a good idea to get contracts in writing?

A: A written contract allows each party the chance to fully understand his or her obligations
under the contract, and ask any questions about the terms before signing. Finally, a written
contract provides the court with the exact terms of the contract, if a lawsuit is initiated.

Q: What is a breach of contract?

A: A breach of contract is when one party somehow doesn't perform its obligations under the
contract. A breach can occur in several ways: if a party doesn't perform on time, performs in a
way that is not in accordance with the terms of the contract, or simply doesn't perform at all.
The non-breaching party can sue the breaching party in order to receive relief.

Q: What relief is a person entitled to in the event of a breach?

A: The basic relief for the non-breaching party is: damages, specific performance, or
cancellation and restitution. Damages is the most common remedy and consist of payment by
the breaching party to the non-breaching party. The amount and type of damages will depend
on the circumstances of each case. Another type of remedy available is specific performance,
in which the breaching party is ordered by the court to perform its duties under the contract.
Finally, the non-breaching party has the option to cancel the contract and sue for restitution,
which puts that party in the position it was in before the other party breached. A non-
breaching party may cancel the contract and sue for restitution if the non-breaching party has
given a benefit to the breaching party. Restitution as a contract remedy means that the non-
breaching party is put back in the position it was in prior to the breach, while cancellation of
the contract voids the contract and relieves all parties of any obligation under the agreement.