What makes a contract legal?

Factual Questions
1

I’m not a lawyer, nor do I have any lawyer friends, so I don’t know if I’m getting everything correct when I ask my question. Nonetheless, I was just pondering this last night.

What makes a contract legal?

I know in most cases, lawyers and their documents and statements and witnesses are necessary to make a contract legal. But as I recall, verbal contracts also have to be upheld if there is proof there was indeed a verbal agreement.

Ex.
Business Guy: I’ll take your $1000 to buy 1000 shares of Acme Inc, which is my company.

I had over my $1000 to BG and he goes off and uses it for his company. I forget it for a while because I’m a big shot millionaire and $1000 is nothing to me. But then his company takes off and now I want to cash in. He tells me he used the $1000 at a strip club and not the company. He gives me back the $1000 I “lent” him before instead of the couple thousands he owes me. I’ve been jipped! So I sue him for millions of dollars and since we had a verbal agreement, I win the millions of dollars and his company crashes and he cries. That’s correct, is it not? (Tell me if it’s not)

Btw, I’m totally aware that this is not how stocks and company shares work, but I’m doing a “Let’s pretend” situation here and I am grossly neglecting the unnecessary parts.

So, last night, I was thinking. Back in high school, I had a friend who was obsessed with becoming an actress. She would talk about it day after day for hours on end. She was convinced that she would someday “make it.” So, in order to humour her, a friend and I asked her that if she did become famous, would she hire me as her make up artist (going through a phase with make up, as most teenage girls do) and my other friend as a manager. Actress-to-be friend said “Of course” and we said “We don’t trust you. Why don’t we get this down in writing” and so we drew up a little contract that said “If ATB ever becomes famous, she promises to hire 7 Up Yours as her make up artist and Other Friend to be her manager.” The three of us signed it, and another friend signed it to be a “witness”. I kept this “contract” and it’s now sitting in a box somewhere in my garage. So, if one day, this Actress-to-be becomes a real Actress, and I dig this ratty piece of paper up, is she required to hire me and the other friend? If she doesn’t hire me, then can I sue her for millions of dollars and win? Can she find a way around it by arguing what “famous” wins? Is this a legal contract that she has to uphold?

2

I’m not a lawyer either, but I have been around a few contracts in my days.

I’ll take a stab at what you are asking, just for fun.

I would say if you have a better lawyer than she does, you might be able to get something out of it. If she or you were under 21 when you signed the contract, that’s a big stop sign right there though. Also, since this contract is based on “ever” meaning any time from now until she dies, I would think that type of contract is fairly weak in court. Most contracts have some sort of a definitive time associated with the obligations of the contract, or at least some constraints on the duration of the contract. I have signed contracts that say “from time to time” I would perform some duties for a particular company, but that had nothing to do with the obligations we had agreed to in the contract. Also, the word “famous” is very vague and open to interpretation, that’s where a good lawyer comes in handy.

But anyway, that’s my take on your question. If you get anything you owe me 20%, OK? :slight_smile:

3

Ok, settle in for a bit, and we’ll do Contracts 101. I hope you’ve all done today’s reading.

To answer the specific question you’ve posed: Is this a legal contract that she has to uphold?, let’s go over the basic rules of contract formation:

To make a binding contract, the parties to the agreement must have three things: offer, acceptance, and consideration.

An offer exists when a party manifests, through words or actions, a willingness to enter into an agreement to undertake certain specific actions. “I will buy your house for $1000” is an offer. “Gee, someday, I’d really like to buy a house like yours” isn’t. An offer must be specific as to all of its essential terms. “I will buy your house for a fair price” is not an offer, because the sale price is an essential term of the contract and, in this example, is ambiguous.

Acceptance occurs when the other party agrees to the terms of the offer as stated. “Ok, I will sell you my house for $1000” is a valid acceptance. Sometimes, the “accepting” party will agree in principle, but propose different terms: “I’ll sell the house, but I need $2000 for it.” The general rule is that the acceptance must mirror the terms of the offer-- any change in the terms is not an acceptance, but a counter-offer, which itself must be accepted. Depending on the terms of the offer, acceptance can be by word (“I accept”) or by act (an offer that “I will give you my house if you paint it” can be accepted without saying a word by picking up the paint brush and starting work).

Consideration is what is tricky. An agreement only binds parties where both sides undertake some obligation. In most cases, consideration is satisfied by an exchange of promises-- I promise to buy your house for $1000, and you promise to sell me your house if I produce the $1000. In other circumstances, one side makes a promise while the other side supplies consideration in the form of doing something they wouldn’t otherwise do. A classic law school case involves an uncle who promises his nephew $500 if the nephew gives up smoking. There, the uncle’s consideration is the promise to pay, and the nephew’s consideration is the forfeiting of his right to otherwise smoke.

In your case, you did not have a contract with your friend because you gave her no consideration. She may have promised you a job if she became a famous actress, but you didn’t incur any obligation in exchange for her promise. The law calls your arrangement a “donative promise” by her, but doesn’t consider it to be a contract that can be enforced.

The other formalities of law: a writing, witnesses, etc., are all inessential to the existence of a binding contract. In some circumstances, these things might be necessary for certain kinds of promises, but most contracts can exist without them.

Class dismissed.

4

claps

Thanks for the clarification. I guess I’ll opt for the blackmail photos instead of pursuing the contract. :wink:

5

Let us not forget that the parties to the contract must be competent. A competent party in a contract is one who has maturity and mental health.

6

Don’t forget to watch out for implied contracts that muddy the waters. You may be held obligated to things that are not specifically spelled out in a contract (they are ‘implied’ by the contract you did enter into). The easy example I remember is that I agree to sell you my house but when I vacate I take the windows with me. Maybe these days leaving the doors and windows on the house are specified but even if it wasn’t it is implied in the contract for the house that the windows and doors come with it. That may be seem obvious but you can find plenty of action in the courts on implied contracts (employment seems to be a common place for it to crop-up…employees and employers are generally obligated to do more than the employment contract stipulates but it can be a gray area on what those things actually are).

7

Also a contract (offer, acceptance and consideration) between competent parties must be to do a legal thing.

A contract to kill someone is not enforceable in court. (See Big Louie v. Mike “The Muscle” Toscaini.) A contract infringing on the insitution of marriage is not enforceable. (I will pay you a million bucks to marry me.) Neither is one to pay gambling debits.

Otherwise valid contracts can also be voided by law. That is why an ancient clause in a real estate contract not to ever sell the house to a “Person of the Hebrew Race” (or whatever) is a nonissue.

8

The offeror and acceptor must be adults, lest the contract be voidable.

9

And don’t forget the necessity for a “meeting of the minds.” In Booger’s example about the house, if B owns more than one house and A is talking about the house on 1st Street while B is talking about the house on 1st Avenue there is no “meeting of minds.”

10

7 up yours, if you promised to make yourself available as your friend’s makeup artist, I imagine that might be enough of an obligation on your part to make the contract binding (except for the fact that you were all minors at the time).

11

Apart from the consideration problem, mustn’t there also be the intention to create a legally binding contract, which might be lacking here?

I googled contract and intention and this was the first link.

12

Regarding contracts: the definitions of “offer”, “acceptance”, and “consideration” are vague and fuzzy.
This is what keeps lawyers employed!

13

Yes, but the intention need only be objectively reasonable. Which is to say that if you act like you are making a contract, but secretly you think it is a joke, then the intention requirement is satisfied, and the contract can be enforced. IIRC, Lucy v. Zehmer.

To add something minor to the discussion here, it should be remembered that while courts generally will not inquire into the sufficency of consideration, consideration must be more than a peppercorn.

14

Just to muddy the waters further, somtimes there can be a substitute for consideration, something that isn’t consideration but serves as it. “Promissory estoppel” or “detrimental reliance” is an example of this; if you reasonably and foreseeably rely on a promise to your detriment, you may be able to enforce the promise as a contract to your detriment. Let’s say your friend already was a movie star, and promised to use you as her makeup artist in her next picture. In anticipation, you move to Cali, buy $1000 bucks of makeup, and rent a trailer. Her promise may be enforceable even in the abscence of consideration due to your reliance to your detriment.

15

Er…take out the last “to you detriment” in that sentence; it should read “you may be able to enforce the promise as a contract.”

16

The concepts of “Promissory estoppel” or “detrimental reliance” are well-established. An example would be a pledge to make annual payments into a charitable building fund.

The hospital (or whatever) takes out loans in anticipation of your promised payments. If you don’t cough up, they’ll have your tail in court.

(I had forgotten about that one.)

17

Actually, not to nit-pick or anything, but in the case of charitable subscriptions the charity does not need to show reliance or consideration to enforce the promise so long as the promise was made in writing. Again, IIRC, Section 90(2) of the second restatement of contracts.

18

From a much earlier post…

1. Legality: depends on what kind of contract this was. You can’t make a contract for certain things or for illegal purposes (e.g., bribery) and certain types of deals like real estate sales need to be in writing.

2. Consent & Capacity: Both of you do this vulntarily and need to have the proper mental capacity to make the agreement – a “meeting of the minds.”

3. Consideration: you give something, the other party gives something. Otherwise it’s a gift or something else, not a contract.

Here’s a good site on contract law basics: http://www.booksites.net/u01_intro_…_contract01.htm

Oh, this assumes you’re asking about US contract law.

19

To expand slightly on Booger’s excellent post, his last sentence refers to the various statutes of frauds. These are the exception to the general rule that an oral contract is valid, albeit usually more difficult to prove.

The most common S/F applies to contracts for the sale of land. Those must be in writing. There are also 2 statutes of frauds in the Uniform Commercial Code. (and a third section in Article One that is very nearly a statute of frauds that I think might surprise even some lawyers on the board.) Your state may also have a S/F that deals with debt guaratees, long term contracts or other types of contracts.

Because some of these statutes can be tricky, and also because of the proof problem I mentioned, written contracts are a good idea.

20

To agree with Random and others, while in most circumstances an oral contract is perfectly acceptable, keep in mind the old addage that it’s not worth the paper it’s printed on. Oral contracts are (usually) legally binding, but only if you can prove that an agreement was actually reached, and without a writing there’s an intrinsic he said/she said problem (which is largely alleviated with a written contract).

–Cliffy

P.S. It’s Lucy v. Zehner, I think.