What Should an Entrepreneur Know: Basic Concepts of Contract Law
At some point in the life of every start-up business, entrepreneurs will ask one variation or another of this question: “can I get a contract that achieves this?” Sometimes, this question is presented as an action plan, “I want to have an employment agreement!” At times, it is given as a matter of fact, “we already have a contract.” Whether a contract does exist, however, depends on whether the purported agreement meets the requisite legal elements of a contract. Since contracts proliferate every aspect of a business, entrepreneurs can benefit from understanding some basic concepts of contract law.
What is a contract?
While specific types of contracts are used for a variety of purposes, a contract is in essence a legally enforceable agreement between two or more parties to do something or refrain from doing something.
What are the essential elements of a contract?
Every contract must satisfy three elements: offer, acceptance and consideration. In all cases, courts will look at whether there was a meeting of the minds; that is, if the parties have a common understanding of the contract.
What circumstances might vitiate a contract?
There are several scenarios under which courts may declare a contract to be void or unenforceable.
As always, there are exceptions to the concepts outlined above. The different considerations that must go into the formation of a contractual relationship constitute only one of many reasons that entrepreneurs should seek legal advice at the outset. This blog post canvasses only the most basic concepts of contract law concerning the validity of a contract. Stay tuned for another blog post on some common terms in a commercial contract.
Tiffany Bennet is a 3rd year law student at the University of Calgary. She is enrolled in the BLG Business Venture Clinic, where she assists clients under the supervision of corporate lawyers from Borden Ladner Gervais LLP.
Blog posts are by students at the Business Venture Clinic. Student bios appear under each post.