Contracts are the foundation of modern business relationships. Contract law as we know it today originated in English common law, but contracts have been around since ancient times. Many of the earliest examples of contracts in history have the same characteristics—offer, acceptance, and consideration—that we currently recognize as essential parts of every legally binding contract.
A better understanding of contract law will help you identify your rights and obligations under an agreement and prevent legal conflicts. However, before signing a business contract, it is crucial to have an attorney review it to ensure it accurately expresses the parties’ intentions.
Many aspects of our daily life, professionally and personally, are governed by contracts.
We obtained the home we live in or the apartment we rent using a real estate purchase or lease agreement. The car we drive was purchased using a sales agreement. We work at an office that our employer rents using a commercial lease and often perform a job with terms dictated by an employment or independent contractor agreement. The office supplies we use were provided on a contractual basis by a provider, and the utilities our job requires continue in service as part of ongoing contracts.
Even in our personal life, we utilize contracts. If you are married, you have vowed to stay together until “death do us part.” This lifetime commitment to your partner is more than just romantic lip service. Marriage is also a legal contract that confers responsibilities on each party.
Contracts have been used throughout the history of commercial civilization. Scholars are aware of sales contracts from Mesopotamia dating as far back as 2,300 B.C. In “the cradle of civilization,” there were contracts for purchase and sales, labor and employment, and marriage and divorce. The purpose of the first writing system, developed in ancient Sumeria, was to document business transactions and create contracts. These early contracts were created with picture symbols marked on clay tablets that hardened into a permanent record.
From the Magna Carta in 1215 to the Louisiana Purchase in 1803, the Universal Declaration of Human Rights in 1948, and the 2015 Paris Agreement, contracts have shaped the world as we know it. Today, most contracts are digital and require little more than a button click to sign, but the record they create is no less permanent than the stone tablets that have survived from Sumeria.
At its most basic, a contract is a voluntary and legally enforceable exchange of promises between two or more parties. This is the most essential part of every contract.
When assessing the legality of a contract, courts look to past judicial decisions (case law) and legislation.
In addition, the Convention on Contracts for the International Sale of Goods (CISG) governs international sales law, and the federal government has laws about how contracts can be entered into by and with the federal government.
Some contractual language might contain legalese, which is often confusing. Your attorney should individually assess every contract to ensure it is valid. Its validity partly rests on what is being contracted and which laws apply to the specific contract. However, every contract should include a few essential elements that are necessary to create a binding agreement based on mutual assent:
Beyond these bare minimum essential parts that make a contract legally binding, business contracts should also contain the following fundamentals:
Always retain a signed copy of a contract for your records in case a dispute arises.
Well-drafted contracts are essential to protecting your business and making sure others keep their promises to you. They set boundaries and expectations for each party and ensure procedures are in place to resolve conflicts.
In contracts, as in business, it is the small details that can matter most. Protect your business by having an experienced Austin business attorney review all potential business contracts before entering them. Book a call to ensure you get what you bargained for.
 Paul Halsall, Ancient History Sourcebook: A Collection of Contracts from Mesopotamia, c. 2300 - 428 BCE, Fordham Univ. (Mar. 1999), https://sourcebooks.fordham.edu/ancient/mesopotamia-contracts.asp.
 8.2 Sources of Contract Law, Law for Entrepreneurs (Saylor Acad. 2012), https://saylordotorg.github.io/text_law-for-entrepreneurs/s11-02-sources-of-contract-law.html.
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