How to make a legally valid contract

To be legally valid, a contract must fulfill four basic requirements:

  • All signees must be above the age of consent. 
  • All parties must agree to the contract freely. 
  • All parties must be able to understand the agreement (legal capacity). 
  • The terms of the agreement must be permitted in law. 

Contracts are formal agreements made between two or more parties. They specify the terms of an agreement — the expectations of all parties and what each party will receive in return for meeting these expectations. 

Business contracts are common legal documents. As such, ensuring that a contract is a binding agreement in the eyes of the law is important for everyone involved.

Any dispute or breach of contract that arises can be resolved quickly.

This is particularly the case for individuals and small business owners that don’t have access to funds to access expensive ongoing legal expertise. 

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, sale of 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 regarding legality can vary, but the main essential elements of a contract  comprise the following:

  • The parties involved are all over the legal age of consent.
  • All parties agree to the contract terms and the offer they outline of their own free will and in good faith.
  • All parties are deemed mentally able (mental capacity) 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.
  • All parties have sufficient time to review the contract and make any counter-offers if necessary. 

All of these requirements apply to oral contracts as well as written ones. Because of issues around the proof, it is advisable to create a written contract wherever possible.

That said, oral agreements are legal contracts in the usual sense. 

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 legal 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 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. They can navigate the often confusing legalese that is typically used in contracts. 

How should 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 the contract signing, such as PandaDoc.

These services make it as easy as possible to add your signature to a wide array of different types of contracts and create a formal mutual agreement.

Create legally binding and enforceable contracts

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 ask 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 is an excellent choice.