Nov 5

Business Contracts

Business Contracts


Contracts are legally binding agreements, and they pervade almost every aspect of our personal and business lives.  Whether you own or manage a business, are an employee or ordinary everyday citizen, you contend with contracts all the time in your dealings with employees, employers, contractors, vendors, commercial and residential landlords, banks, utilities, insurance companies and, of course, customers and clients.

The contract is one of the most innovative and useful inventions in the history of jurisprudence, law, because it allows strangers to do business together with the assurance that their agreement will be enforced by civil authorities.  By the very nature of contracts, an experienced lawyer or attorney should be involved in preparing the actual document.  Contract law is one of the many business law services rendered by Downriver Lawyers located in Taylor, Michigan.   Michigan contract law is ultimately based on Old English common law and can be divided into four major areas:

  •   Formation
  •   Defenses
  •  Termination
  •  Damages


To be enforceable by a court, every contract must meet several general requirements.  The requirements include:


  •  Offer and Acceptance
  •   Consideration
  •  Legal Purpose
  •  Capable Parties
  •  Mutual Assent


Offer and acceptance – There must be a clear or definite offer to contract and an unqualified valid acceptance through words spoken, a written document or through circumstances or conduct.  For example, signing a purchase order or accepting delivery of goods knowing that the sender expects payment, is usually binding.


Consideration – Each party to a contract has to promise or provide something of value to the other. Thus, giving a gift by one person to another is not an enforceable contract, as value is given by one to another but no value is received by the giving party.


Legal purpose – The purpose of the contract must not violate the law.  For example, a promissory note that contains an interest rate that would violate usury law, or a service agreement to someone to rob a bank, have no legal purpose and, thus, would constitute a contract without a legal purpose.


Capable parties – To be “capable” of making a contract, the parties must understand what they are doing.  Thus, parties to a contract must be of sound mind and of a legal age.  Minors and persons deemed to be insane do not qualify.  Contracts they enter into would not be enforceable under most circumstances.


Mutual assent – This is often referred to as a “meeting of the minds”.  This means that the contracting parties must intend to be bound by their agreement and must agree to the terms.


In addition to these general rules, federal and state laws may impose more requirements on particular types of contracts.  In the State of Michigan, the three main requirements for contract formation are an offer, acceptance and consideration.  Consumer contracts must often meet additional requirements and some contracts must be in writing to be enforceable.  Attorneys and lawyers are experienced and knowledgeable in the requirements of various types of contract law.  Thus, seeking advice of a lawyer is advised.



It is possible to question the validity of a contract by raising legal defenses.  These defenses as alluded to earlier go further in this case to include duress, mutual mistake of fact and extreme unfairness as in the case of being unconscionable.


The Michigan Statute of Frauds prevents certain types of oral contracts from being enforced.  Contracts for the sale of real estate or goods worth more than $500, for example, must be in writing.


If one party successfully establishes a defense, the contract may be ruled either void or voidable.  A void contract is treated as if it never existed.  A voidable contract may be avoided by one party.  For example, in the can of a contract between an adult and a minor, the minor has the option of terminating the contract, but the adult does not.



There are several ways in which a contract may be terminated in Michigan.  The most common way is through expiration of the contract according to its terms.  The parties may also mutually agree to early termination of a contract such as in the case of an employment contract where both the employer and employee agree to terminate an employment contract before it expires.  A contract may also terminate if one party is in violation of the terms of the contract also known as breach of contract.  If there is a minor breach, the non-breaching party may receive damages, but does not justify terminating the contract.  A major breach entitles the non-breaching party to unilaterally terminate the contract.



When one party breaches a contract causing losses to the other party, the non-breaching party is entitled to damages.  There are three main types of damages.


n  Money damages – Usually preferred when it is relatively easy to put a dollar amount on the plantiff’s losses


n   Specific performance – Court forces the defendant to comply with the terms of the contract


n  Liquidated damages – Contract specifies a certain amount of damages in the case of breach of contract.  Courts are reluctant to enforce liquidated damage clauses if they are unreasonably high in light of actual damages.


For practical advice on getting your agreement in sound and enforceable contract form, engage the attorneys at Downriver Lawyer. They are ready to handle all your contract law needs whether you are an individual or a business entity.  Contact Downriver Lawyer at










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