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WHAT MAKES A CONTRACT?

Contract statutes can be found in Oklahoma Statute Title 15. The definition of “contract” is provided by Section 1 and states: “A contract is an agreement to do or not to do a certain thing.” You probably knew that much already!

Section 2 provides: “It is essential to the existence of a contract that there should be: 1. Parties capable of contracting. 2. Their consent. 3. A lawful object; and, 4. Sufficient cause or consideration.”

In general, this means that someone over the age of eighteen years old agrees to do something that is legal and pays (or is paid) or provides (or is provided) some sort of consideration for it. By far my favorite statement about consideration is that “a mere peppercorn shall suffice.” Anyway, you can contract for whatever you want, but if you do not meet the above requirements, chances are, a court will not enforce it.

There are a few contracts I would like to highlight here for your business. First, when you form your business entity you need an operating agreement or bylaws, entity formation can have a huge impact on your future liability. An operating agreement or bylaws is a great way to lay out the rules of your business. This will help limit liability and will allow you and the individuals you go into business with to have a clear understanding of what they are getting themselves into.

Second, I will always encourage a contract to be drafted and used in any and all business transactions and dealings. This industry is ever-changing and a written contract between the parties will help define what is expected of each party in the event of a breach, having a written contract gives the court something to interpret. This is a huge benefit.

Third, non-compete agreements and non-disclosure agreements. Both of these are kind of difficult to deal with for the other party because they essentially limit what they can do with the information gained from working with or for you. They can be very helpful and beneficial for you and can provide a way to protect your secret sauce.

Contracts are important for all parties involved. They are the best and most straightforward way to limit liability and protect yourself. In this rapidly changing space, contracts are a must.