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In Iowa, two or more parties can enter a contract for any reason and the contract can include any stipulation that isn’t illegal. Therefore, the most important items to know before signing a contract are 1) to what you are agreeing, and 2) what actions or circumstances would cause the contract to break down and lead to a breach of contract.  

This article will help guide you through important topics to consider before entering into a contract in Iowa.  While this article focuses on Iowa contract law, it does apply to contract law generally.  It is important to remember that this article is for informational purposes only and does not constitute legal advice.  The article will lay out the basic terms of a contract and what to do when there is a breach of contract.

Signing of a contract

What is a Contract?

A contract is a legally binding agreement between two or more parties.  In a perfect world, all parties would do exactly what they are supposed to do in the contract, and that would be the end of it.   No need for the attorneys or courts to get involved.   Unfortunately, that is not the case.  Terms can be misunderstood; one party can fail to perform for any number of reasons putting the contract in dispute.  That is why it is important to understand the underlying contract law, to help things go as smoothly as possible – and to help navigate the situation if it turns south.    

What is the Difference Between Written Vs. Oral Contracts?

It may surprise you to know that most contracts do not have to be in writing to be enforceable.  Most oral contracts are binding; however, they are much harder to prove.  If a breach of contract occurs, and you have to rely on Iowa Contract Law for enforcement, you will need to prove the existence of a valid, enforceable contract.  If you have a written contract, you can simply submit that contract as evidence.  In the case of an oral contract, you will need to provide sufficient evidence that proves the existence of a valid contract.  For more information read our article on Are Contracts Valid Even If They Aren’t Written Down?

Some contracts, like those for the sale of land, prenuptial agreements, contracts that will take over a year to perform, among others, need to be in writing.  It is advisable anytime you have an agreement to reduce that agreement in writing and have all parties sign.  

What is an Enforceable Contract?

Simply put, an enforceable contract is one that can legally bind the parties.  That means, if contested in court, the judge can make a ruling and force someone to perform per the terms of the contract or pay for non-performance – as the case may be.  

In Iowa, as in other states, individuals can enter into a contract for any reason.  Contracts can cover the sale of goods, employment, anything you can think of.

A contract for a criminal or illegal act is not enforceable.  The court will also not enforce any contract that is “unconscionable.”  

A quick review of contract

What Is an Unconscionable Contract?

An unconscionable contract is one that is so one sided it would be a miscarriage of justice to enforce it.  This occurs under several circumstances.  For example, one party can assert undue influence over the other to sign.  Or one party can have unequal bargaining power over the other.  

Similarly, a contract signed under duress, meaning one party has used threats or intimidation to force the other to sign, is considered unenforceable because it is unconscionable.  

Who Can Enter into a Contract?

Individuals can enter into contracts.  So can companies.  Though there may be limits to which employees have the authority to bind companies to act.  If in doubt, speak to an experienced contract attorney to guide you through the process.  

Two parties of sound mind who are over 18 can enter just about any contract, subject to the limitations explained above.  

Contracts entered into with minors can be enforceable under certain circumstances.  However, in some circumstances, a minor does have the right to disavow or cancel a contract made while they were underage.  

Good and Sufficient Consideration

To be enforceable, a contract must have “good and sufficient consideration.”  In simple terms, this means that if you are getting something, you must be giving something in return.  

A contract that simply states A will pay B ten thousand dollars is not enforceable because there is no consideration.  B is not doing anything in return for the money.  If the contract states A will pay B ten thousand dollars for B to fix A’s roof, then it becomes enforceable.  There is consideration here.  B is fixing a roof to get that money.  

Specific Terms

A contract should be as specific as possible to avoid any confusion.  Terms should be defined.  Being as specific and detailed as possible can avoid breakdowns and miscommunications.  

If A contracts with B for the sale of his Honda Accord, but A happens to own two Honda Accords, the contract should exactly describe the year, make, model and color so there is no confusion.  

If a contract calls for payment, it should specify when the payment is to occur.  How should the money be paid – in cash, cashier’s check, wire?  Be specific.  Where should the payments go?  What happens if a payment is missed?  

What is Breach of Contract?

Even if you do everything right, things can still go wrong.  You can have two people of sound mind and legal age enter into a written contract for good and sufficient consideration and still the contract can break down.  This is defined as breach of contract.  Iowa contract law allows individuals to use it under breach of contract.  

Breach of contract occurs when one party does not do what they promised to do in the article.  If B fixed the roof, but A does not pay, A is in breach of contract.  

In some cases, if the amount you are suing for is not that high, you can take the matter to small claims court.  If the amount is larger you will need to file a civil suit for breach of contract.  When you sue for breach of contract, you can ask the judge to force the person to perform as promised under the contract.  Alternatively, if you have suffered some harm because the person did or did not perform as promised, you can sue for monetary damages.  The terms of the contract will often dictate what you can and can’t sue for.  

Some contracts will include provisions of what law will apply in case of breach of contract.  Some contracts will say that before you can sue, you must take the matter to arbitration or mediation.  Therefore, it is important to read all terms of a contract carefully before you sign, as you can be bound by those terms.  If there is any confusion, you can always contact an attorney to help explain any terms and conditions.  

Our Iowa attorneys in Cedar Rapids are ready to help you with your contract questions and needs.

Posted 
September 21, 2022
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