What Makes a Contract Legally Binding in Tennessee?

From handshake agreements for cleaning services to the signing of the United States Constitution, contracts are among the broadest and most important areas of American law. What makes a contract legally binding in Tennessee depends on several factors, including the nature of the agreement, parties, and contract terms.

Only an experienced Manchester contracts lawyer from Burch & Stewart Attorneys should help you determine the validity of a contract executed in Tennessee.

Tennessee Contract Basics

A contract is generally defined as an enforceable exchange of promises between two or more parties for something of value. Oral or unwritten contracts can be enforceable, but most business, high-value, and real-estate contracts are legally required to be in writing. In Tennessee, a contract must meet the following basic criteria:

Offer and Acceptance

One party must make an offer to another party, and the other party must clearly accept the terms. If the other party rejects the terms, he or she may make a counteroffer that the first party can accept or negotiate.

Meeting of the Minds

Both parties must intend to create a legally binding agreement and mutually understand the contract terms. For example, if the owner of three cars agrees to sell one car to his neighbor, they must both be thinking about the same car for the contract to be binding. Any attempt to void a contract on this ground must also be in good faith. If you knew your neighbor was asking about the red car, even if you didn’t specify the vehicle in the agreement, you may still have created a binding contract.

Consideration (Valuable Exchange)

A contract must be an exchange of promises for value, which the law calls ‘consideration.’ Examples of binding consideration include the following:

Money
Goods
Services
Trades
Promise to do something
Agreement not to do something

For example, if you need a package picked up by Wednesday and the postal carrier agrees to stop by but fails to do so, this contract might not be enforceable. Why? Because you did not offer anything in exchange for the carrier’s promise to pick up the package.

Legality and Capacity

Importantly, the contract terms must be enforceable at law. You cannot enforce a contract for the exchange of illegal drugs. Likewise, each party must have the legal capacity to contract. This generally means they are over the age of 18 and mentally competent.

Understanding the Statute of Frauds and Written Contracts

Although some contracts can be oral, Tennessee law requires certain contracts to be in writing and signed by both parties. This is called the statute of frauds, and it applies to most business and financial transactions in Manchester (see Tenn. Code Ann. § 29-2-101). Although exceptions apply to this legal requirement, it’s always best to have some record of the agreement, even just a text message, email, or voicemail.

Manchester, TN Attorneys to Review and Draft Business and Personal Contracts

Contract law is complicated, and even one misunderstanding or unlawful term can void an entire agreement. Always work with a dedicated contract lawyer from Burch & Stewart Attorneys to discuss drafting and enforcing contractual agreements in Tennessee. Call (931) 954-1066 or connect with their Manchester business and contract team online today.