Understanding contractual relationships in business

What many people may not realize that contractual relationships may exist in Michigan even when there is nothing written down to prove the existence of a contract. For instance, the courts do recognize oral contracts in some cases. This is not always the preferred way to start a contractual relationship with another party as it may be extremely difficult to prove an oral contract, but they are viewed as legally enforceable. As with all contracts including oral contracts, there has to be an offer, acceptance and consideration for the contract to be valid. Missing one of these elements may make a contract vulnerable to attack if a party wants to get out of the contract.

Depending on the entities that are contracting with one another, there are various things that need to be taken into consideration when starting a contract, specifically a business contract. In business, the rights and responsibilities of the parties need to be clear so that each party knows where they stand. As such ambiguities in business contracts can often lead to contract disputes that could cost each side a lot of time and money depending on the nature and circumstances surrounding the disagreement. Courts are often involved when a dispute in a business contract occurs.

A contract in business can be quite sophisticated. As mentioned previously, offer, acceptance and consideration are the cornerstones of a contract. With that being said however, there can be revocations and counteroffers that can make things complicated. Timing is everything when it comes to a contract. For example, the party making the offer can revoke an offer as long as it has not yet been accepted. If before revocation, there has been acceptance, then an attempted revocation can usually no longer take effect.

There are also nuances when it comes to rejections and counteroffers. Any offer can be rejected. If that rejection is followed up with new terms and conditions, then that becomes a new offer that the other party can then decide to reject or accept. Acceptance can be in writing or completed by performance.