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How to make a legally valid contract

Contracts are essentially formal agreements made between two or more parties. They specify the terms of the agreement, such as what each party will be expected to do and what they will receive in return.

Making sure that any contract is a binding agreement in the eyes of the law is hugely important for everyone involved as it means any dispute or breach of contract that may arise can be quickly and clearly resolved.

Basic requirements

The basic fundamentals of a legally-binding contract are that it must include an offer outlining what is going to be provided, and an acceptance of that offer. There must also be something of value exchanged, which could be a service, goods, money or even a promise to provide one of these things.

There are many other factors involved in determining whether or not a given contract is legally valid and state laws can vary, but some examples of essential elements are:

  • The parties involved are all over the legal age of consent.
  • All parties agree to the contract and terms of an offer of their own free will and in good faith.
  • All parties are deemed mentally able to understand and fulfill the terms of the contract.
  • Everything in the agreement is within the law – for example, a contract would be immediately void if it involved hiring a hitman.

Verbal and written contracts

It’s possible to have either a verbal or a written contract agreement, and either can technically be legal. There are many cases of verbal contracts holding up in court, but it is by no means guaranteed. It is inadvisable to rely on verbal contracts as they are far more difficult to prove, making them a much riskier option even if the agreement is casual in nature. Some types of contracts need to be written, so it’s almost always a good idea to have something in writing if you want it to hold up in court.

Written contracts are by far the most certain way to ensure that your agreement will be valid in legal terms. Something that is almost always necessary with a written contract is for all parties to sign it. A signature is a legally-recognized way to formally accept the contents of the contract and bind yourself to its obligations.

At the end of the day, legal services and lawyers are the people who best understand how to make a contract legally valid, so it’s always safest to get some legal advice about your contract if you really want to be sure that it’s legally-binding.

How can a contract be signed?

A contract can be signed either physically or electronically, and these signatures are an important part of the contract. Physical signatures used to be the only way of signing, and it’s still the most common method overall. However, it’s actually quite a time-consuming process, and in today’s interconnected world, it’s often highly impractical.

Imagine a company doing business with another in a completely different country or state. They would need to print a contract, physically sign it and then either send it in the mail for the other party to sign or scan it and email it to them. Not only does this take a lot of time, but it also introduces the opportunity for human error, things getting misplaced or lost in the mail, and can be expensive.

Electronic signatures, while quite a recent development in the history of contracts are in many ways simpler and more practical. Documents can be stored digitally with no need for printing and can be signed with a click of a mouse or tap of a screen.

Security is also a lot more robust, as the signatures and contracts themselves can be encrypted and stored securely. To top it off, electronic signatures, or eSignatures, are fully legally recognized in many countries (including the US, United Kingdom, Australia, Canada, Switzerland, South Africa, etc.) as a valid way to sign contracts.

How to electronically sign a contract

There are now a variety of ways to sign documents electronically. Using Microsoft Word’s built-in eSignature feature is one popular way, but it can be quite complicated to figure out, and Word falls short functionally when it comes to sending contracts, following up, and tracking them once they’re sent.

Probably the easiest and most practical way is to use a service that is specifically designed for contract signing, such as PandaDoc or DocuSign. These services make it as easy as possible to add your signature to a contract and make the contract a formal mutual agreement.

Make sure your contract is legally binding

As a general rule, if you follow the basic structure of a contract, draw it up in written form, consult a law firm specializing in contract law to confirm everything for you, and then get every party to sign it, then your contract is almost certainly going to stand up to legal action.

If you want to make life easy for yourself and everyone involved then using an eSignature service like PandaDoc or DocuSign is an excellent choice. Some of these services even offer a whole range of other functionality, including customizable contract templates, as well as powerful document tracking features to see how recipients interacted with your contracts, helping you to close more deals.