A contract typically consists of the fairly standard parts. Each part may be different depending on what the contract is for, and they may be mixed and matched, but these terms will be in most contracts.
- The Title – This is what you call the agreement (obviously).
- The Parties – Identifies the individuals or entities subject to the contract.
- The Recitals/Background – This explains why the parties are entering into the contract. They can be more important than you think.
- The Consideration – Each party needs to have some sort of “legal detriment” or obligation when entering into a contract for a contract to even exist. The idea is that one party can’t be bound to another in exchange for nothing. Something of value needs to actually be exchanged. This is most often money, but it can also be a binding promise of some sort.
- The Terms – The terms explain what each party is going to do, and perhaps how they will do it and for how long. This is more or less the reason for the contract.
- The “Boilerplate” – These are extra terms that make a big difference in the contract but people like to ignore.
- The Signatures – Executing the contract makes it formal and official.
I will be going over most of these contract elements in greater detail in subsequent posts.
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Sources: Photo by Mandroid