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How do you write a legally binding contract?

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Individuals can write a legally binding contract by proposing an exchange of value items or information from each party, the Legal Information Institute says. A contract is legally binding if the proposals outlined in the contract are within each party's capacity and do not breach any laws. Contracts are generally governed by state statutory or common law.

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A contract between two parties generally states the services or goods that each party is promising to each other and what can happen if the promise is not fulfilled, the Small Business Association notes. A contract is a legal agreement, so all parties must consent to the terms in order for the contract to take effect. The contract writer must make certain the terms are clear and each party understands its promises to one another. If the terms are not agreed to or understood, the contract is revised. Most contracts are not immediately accepted without some type of discussions and negotiations.

Once a contract is finished and the parties agree on the terms, both parties execute the contract, many times with a notary public present, the National Notary Association explains. A notary public is an impartial witness who can verify the validity and authenticity of the contract.

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