Michigan

Elements of a Michigan Contract

Contracts are the lifeblood of business. Without enforceable contracts, much business activity that we all take for granted would likely grind to a halt. Under Michigan law, contracts can be oral, written, express or implied.

There are four basic elements that must be present in order for an enforceable contract to be formed. First, the parties must have the legal capacity to make make a contract. For example, a party does not have the legal capacity to enter into a contract if they are a minor or mentally incapacitated. Second, there must be an offer and acceptance of that offer. Third, the parties' agreement, must be supported by what is called "consideration". Consideration is merely a legal term for something of value. Fourth, the contract must have a legal subject matter.

Often times, business people will try to save time or money by not having a formal, written contract prepared to document a deal. The business person will instead simply exchange oral promises regarding the deal, with the expectation that the other side will either keep their promises or that if they don't, the oral contract will be enforceable. This can be a very dangerous way of doing business.

While it is generally true that oral contracts are enforceable, under Michigan law certain contracts must be in writing to be enforceable. These contracts includes the following:

1. Contracts involving transfers or leases of real estate.

2. Contracts that are incapable of being performed in one year.

3. Contracts in which one person agrees to be liable for another person's debt.

4. Contracts for the sale of goods for $1,000 or more.

Even if a contract is not required to be in writing to be enforced, the better practice is to always reduce any important agreement to writing. This helps to ensure that the parties' expectations are met and helps to prevent later misunderstandings. Also, from a practical standpoint, written contracts are usually easier to enforce than oral contracts.

Any person who is getting ready to enter into an important contract should consult with a knowledgeable Michigan contracts lawyer to help make sure that they get the benefit of their bargain.

Full post as published by Michigan Business Lawyer Blog on June 25, 2008 (boomark / email).