By Lane V. Erickson, Idaho Business Attorney
It really doesn't matter whether you are a sophisticated and experienced businessman or whether you have just created your own business. If you are operating a business in Idaho it is likely that at some point you're going to be faced with entering into contracts with other parties. The purpose of this particular article is to help you understand some of the basics that you need to know in order to either create your own contracts or understand contracts that others may present you with as part of your business transactions.
At the Racine law office, our premier team of Idaho business lawyers have assisted clients through their business in creating or entering into business contracts. We have assisted clients in their Idaho business transactions including business contract for over 70 years. Our Idaho business attorneys include partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. Each of our attorneys as skilled and experienced with business transactions and in helping our business clients. We are confident that we can help you too!
So what are some of the basics that you should understand about Idaho contract law? Well there is no article that can teach you everything that you need to know, here are four basic things that will help you understand the importance of business contracts and how they can affect your business.
1. Parties Who can Enter Into a ContractThe first thing that you need to understand is who can act as a party to enter into a contract. A party to a contract can be any person or entity that has the legal ability to enter into a contract. This includes individuals as well as other businesses. It could also include governmental agencies, nonprofits, Partnerships, as well as any other legally recognized entity. This also means that there are limitations.
A person who is under the age of 18 cannot legally enter into a contract in Idaho without someone who is over the age of 18 co-signing with them. This doesn't mean that everyone who's over the age of 18 can enter into a contract. There are some limitations when it comes to a person having legal capacity. As an example, if a person is suffering from a disability or a handicap it may mean they do not have legal capacity. If they don’t have legal capacity, then they cannot enter into a legally-binding contract.
2. An Offer and an AcceptanceThe next most important thing for you to understand about a contract in Idaho is that they're usually is an offer and an acceptance which creates the contract in the first place. An offer and an acceptance can simply be between two parties, or it could include many more people. Typically, and offer simply says what it is the person is offering to do in exchange for what they want to receive from you. Likewise, and acceptance of an offer is a person agreeing to what the first person stated.
Often, in business transactions, negotiations are an important part of the contracting process. In a negotiation offers may go back and forth several times before an acceptance occurs. This is usually in the form of counter-offers.
For example, if you were selling your home, and you listed it for sale for $100,000, you may receive a counter offer from a potential buyer stating that they will pay you $95,000 for it. You may take that counter offer and make an additional counter offer saying you would agree to $95,000 if the buyer will pay a portion of the closing costs. These counter-offers may go back and forth between you and the buyer and tell you both agree on how the transaction will occur.
3. An Exchange of PromisesThe next thing for you to understand about a contract in Idaho is that there usually is an exchange of promises in order for there to be a binding contract. In the example listed above, the seller of the property was promising to give title to the property to the buyer in exchange for the promise of payment. Likewise, the buyer was promising to exchange the payment for the promise of receiving title to the house.
Even though a binding contract requires an exchange of promises, it does not require that those promises have to be equal in value. In the home example above, the buyer could make a counter-offer for $50,000 in exchange for title to the home. Even though the seller originally stated they would sell it for $100,000, meaning this is what they believe the value of the home was, if the seller agreed to the $50,000, it doesn't mean the house is only worth $50,000. It may only mean that the seller is eager to sell the property as quickly as possible. So while an exchange of promises is required, there is no requirement that those promises need to be equal in value in order to be valid.
4. The Terms Must be Understood by Both PartiesThe last thing that you need to understand is that all of the terms of the contract must be understood by the parties in order for the contract to be legally enforceable. I will use the home example above to illustrate again the point that the terms must be understood by both parties. Let's say the seller has two homes that he is trying to sell. He offers home A at a sales price of $100,000 and home B at a sales price of $50,000. Suppose that a potential buyer only sees the listing of home A for sale at a sales price of $100,000. Let's say he makes what he believes is a counter-offer to the seller to buy it for $50,000. Let's also suppose that the seller for some reason believes that the buyer is talking about home B and accepts the offer. In this example, the terms that the parties are talking about don't match up. As a result, there is no valid contract because the parties are not talking about the same property.
This is one of the main reasons that when we work with our clients we insist that all contracts be in writing. This allows us to help our clients avoid misunderstandings and make sure that they are entering into valid and legally binding contracts.
We have assisted numerous clients in either creating or entering into business contracts. We are confident that we can help you too.
Enlist an Idaho Business Attorney to Help YouOur team of Idaho lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.