The Basics of Contract Formation Part 1
Most construction professionals are familiar with construction contracts because they are the foundation of every construction relationship. Our Clearwater construction lawyers know that the contract process can flow smoothly or it can become more complicated due to various elements. This is why we want to share a few contract basics to help you navigate the process more effectively. Read Part 2 to learn more.
What Makes a Valid Contract?
An offer is simply a promise of one party to do one thing in exchange for another thing. An example of an offer could be bidding for a government contract, it can be a proposal to do work or to provide supplies, or it can be an email agreement that says I will do this if you pay me this.
An acceptance is an agreement to all of the terms contained in the original offer. This could be in the form of the government approving your bid, receiving a notice to proceed (NTP), or it can be a signed contract. The NTP is a letter from the principle, for example, the prime contractor, that notifies the subcontractor of when they can begin working on the project.
A contract must be mutually beneficial to be valid. The legal term for this in contract law is consideration. Both parties are obligated to provide some value and receive some benefit. When there’s a lack of consideration, only one party is obligated. This tends to happen with change orders.
For example, due to a hurricane, a contractor may submit a change order to the cover the major price increase of materials that occur as a result. The owner can deny the change order because outside of the original contract agreement, the owner is not obligated since there will be no additional benefit for them paying the extra expense.
Consideration is vital. Without it, a contract can be unenforceable.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.