contract faq

What is a contract?

A contract is an agreement between two or more persons (individuals, corporations, partnerships, limited liability companies, or government agencies) to do, or refrain from doing, a particular thing in exchange for something of value.

What is required for a binding contract?

The basic elements of a contract are: (i) offer; (ii) acceptance; and (iii) consideration (payment or a promise).

What constitutes an offer?

The person making the offer must intend to create a legal obligation, or appear to intend to create a legal obligation. If the circumstances of the offer would cause a reasonable person to believe there was no intent to enter into a binding agreement (i.e. a joke), it will not be considered a valid offer.

Do newspaper advertisements, price quotations, or catalog prices constitute an offer?

No, it would be considered an invitation to negotiate or make an offer and cannot be accepted in a contractually-binding manner.

Does an offer have to be in writing?

No. But, an offer must be communicated in some manner to be valid.

Can an offer be withdrawn?

Yes, an offer can be withdrawn or revoked at any time before acceptance by communicating the withdrawal or revocation to the offeree.

Are there ways an offer terminates without it being revoked?

In addition to revocation of the offer, offers may be terminated by a counteroffer, rejection of the offer, lapse of time set forth in the offer, the death or disability of either party, or if performance of the contract becomes illegal after the offer is made.

What is a counteroffer?

A counteroffer is a new set of terms and conditions given in response to the original offer. A counteroffer acts as a rejection of the original offer and causes it to be null and void.

When is a contract performed or discharged?

A contract is discharged by performance of its terms. If a person offers to perform the contract pursuant to its terms and the other party refuses to allow performance, the contract may be deemed discharged.

When does a breach of contract occur?

A breach of contract is a failure to perform the contract in the manner called for by the contract. A party is entitled to contractual remedies if the other party breaches a contract.

What is the duty to mitigate damages?

A non-breaching party has a duty to mitigate damages, which means to take reasonable steps to minimize damages. The failure to mitigate damages may cause the non-breaching party to only be allowed to recover damages that would have resulted if mitigated.

What does having capacity to contract mean?

Parties to an agreement must have contractual capacity before the agreement will be binding on both parties. Contractual capacity is the ability to understand that a contract is being made and to understand its general nature. The fact that a person fails to completely understand the contract or fails to review its terms does not mean that the person lacks contractual capacity.

What is an option contract?

An option contract is a contract that gives the right to one party to enter into a second contract with the other party at a later date. The most common option contract deals with the sale of real estate, when the prospective buyer will be granted an option to purchase the property within a specified period of time. If the option period expires, then neither party has any obligation to the other, but the money paid for the option is not returned.

My 15-year old daughter just signed a contract for cell phone service. Is this contract valid?

No, the contract is not valid. In Washington, a person must be 18 years of age to enter into a contract. With some exceptions, a contract made by a minor is voidable. The minor, in other words, may avoid the legal liability under a contract. Upon reaching the age of 18, an individual may affirm or ratify the contract and therefore make it contractually binding. One exception to the general rule is that a minor will be liable for the reasonable value of necessaries. Necessaries would include food, clothing, and shelter. Courts have also included within the definition of necessaries medical care and a minor’s necessary legal services.

How does a mistake affect the enforceability of a contract?

A contract may not be enforceable if one or both parties were mistaken as to an essential and material fact relating to the contract.

If I sign a contract without reading it, does that affect the enforceability of the contract?

A person who has the ability and the opportunity to read a document before signing it is contractually bound by the terms of the document even if the person signed it without reading it. Even if a person is unable to read or understand the terms of the contract, that person is still bound by the terms of the contract since he should have tried to obtain an explanation. An exception to this rule is if the other party knows, or has reason to know, that the signer cannot read the contract or has limited ability to understand its terms.

What does it mean to rescind a contract?

Rescission of a contract means to put the parties back in the same circumstances they were in before entering into the contract. This often requires the consent of both parties.

Must a contract be in writing to be enforceable?

No. Oral contracts can be valid and enforceable. The law does require that certain contracts must be in writing in order to be enforceable. Some examples of contracts that must be in writing include those lasting more than one year, involving the sale of real estate, guaranteeing the debt of another, for the sale of goods costing more than $500, and prenuptial agreements.

Does a written contract have to be signed by both parties in order to be enforceable?

Not necessarily. A letter signed by only one party setting forth the terms of the oral agreement may be enforceable. However, the writing, whether it be a letter or memorandum, must be signed by the person against whom you are seeking to enforce the contract. The writing must contain all of the material terms of the contract so that a Court can determine what has been agreed upon.

Does a contract have to be notarized?

Not in general, although there are some exceptions to that rule. Some examples include deeds and leases lasting more than one year.

If parties disagree about the interpretation of a contract, how do you determine who is correct?

If the terms are clear and are not vague, courts will enforce the contract as written, regardless of the parties’ intent. If there is a dispute as to the interpretation of a contract and the terms are vague, courts seek to enforce the intent of the parties to the contract. The intent will be what a reasonable person would believe that the parties intended. In interpreting contracts, words are interpreted according to their ordinary meaning. The way parties have used terms in their prior relationships can also be used to determine what the parties meant by the words they used in a contract.

I am thinking about joining a gym, what are my rights?

Gyms and health clubs are regulated in Washington in order to protect members from unfair or deceptive acts. Every gym or health club is required to maintain a written list of all membership plans available through the club, including each plan’s price. The club is not allowed to offer membership plans that are not on the list. Clubs also cannot offer special plans or discounts unless the offer is in writing and available to all prospective members. All membership agreements must be in writing.

The club must inform the prospective member in writing of his or her cancellation rights. By law a member can cancel a membership contract for the following reasons:

  • For any reason within 30 days if the contract is for 1 year or longer.
  • If the member dies or becomes totally disabled.
  • If the member moves his or her permanent residence more than 25 miles from the club or affiliated club and the contract is for more than 1 year.
  • Up to 5 days after the club opens if the membership was purchased prior to the club commencing business.

This list is not exhaustive and there may be other reasons to cancel a membership contract. Upon cancellation, the club must provide a refund of any prepaid (unearned) membership fees within 30 days.

Is it correct that contracts must include the addresses of contracting parties for it to be legally binding?

No. In very basic terms, a contract need only identify the parties and the parties’ respective obligations. With a few exceptions, contracts in Washington do not even need to be in writing. Oral contracts are enforceable in Washington.

Can I break my lease without legal recourse and get back my deposit if landlord has not lived up to his side of the agreement?

If the landlord has not lived up to his side of the agreement in a material way – meaning the breach must be significant – that may be a basis to terminate the lease and get back a deposit. However, these situations can be very complicated. Especially in the context of residential leases, the law creates certain duties between landlords and tenants and in some cases certain steps that must be followed before terminating a lease. Those other remedies need to be tried prior to breaking a lease. Also, even if a landlord breaches a lease and you are able to terminate it that does not necessarily mean you get your deposit back. Depending on what the deposit was for, the landlord may still be entitled to retain all or a portion of the deposit.

Please contact us to speak with an experienced attorney at Blado Kiger Bolan, P.S. for your questions about contract laws.