How do I know if a contract is legally binding or non-binding?

How do I know if a contract is legally binding or non-binding?

A contract can be perceived by the law in two ways: a contract that is legally binding or is non-binding. The core difference between whether a contract is binding or non-binding is the fact that only the contents of a binding contract can be enforced in a court of law.

What are the characteristics of a legally binding contract?

When a contract is drawn, both parties are agreeing to maintain what they have promised to one another. In an Employment Contract, the employer could be promising to supply a certain amount of bonus pay, while the employee is simultaneously promising to keep company information private and internal. If the employer or employee breaks their agreement, either party can go to court and prove the contract has been violated.

The contractual violation can only be consequential if the contract is deemed binding. The first feature of a contractual agreement that makes a contract binding is the offer and the ability to accept or decline that offer. For example, when an Employment Agreement is offered to an employee, they should feel like they can decline what is being presented. The employee should not feel forced to accept the conditions of the proposed contract.

Second, there is opportunity to evaluate how much both parties can benefit from this potential employment relationship. For example, the amount of compensation promised to the employee could allocate considerable value to the contract itself.

Third, the contract should be created with the intent to produce a document that is lawful and legitimate. And further, the contents of the contract itself cannot include any elements that are illegal and still be considered valid. Every component of the contract must be legal to be enforceable.

Lastly, the person agreeing to the outlined terms and conditions has the legal ability to sign the contract.

What qualities produce a non-binding contractual agreement?

A contract can be categorized as non-binding if it fails to meet the above criterion or if a court of law believes they cannot enforce it. As noted above, what makes a contract legally binding also makes the contract itself enforceable. Thus, if a contract fails to meet its requirements, it will become non-binding and unenforceable in a court of law.

If you would like a contract revised or wish to create a legally binding contract, please contact KCY at LAW by filling in an online consultation request or contact us by phone at 905-639-0999 to book your consultation today.