1. Consideration
2. Mutual Assent

Consideration

Consideration is a legal term for quid pro quo.  In other words, consideration is something of value that is offered in exchange for something else of value.  In everyday experience, when you buy a box of Krispy Kreme donuts you give up some money and in exchange the store gives up the donuts.  Both the money that you give up and the donuts that the store gives up have value to the respective parties.  Essentially there are two separate concepts required for consideration to be valid and enforceable.

The first concept is the actual sought after exchange.  In legal circles this is called the “bargained for exchange“.  In my previous example when you go looking for Krispy Kreme donuts you are seeking out an exchange.  Additionally, the store that offers the donuts for sale is also seeking out an exchange.  In other words, there are at least two parties looking to exchange something that the other party has to offer.

The second concept involves giving up something of value in order to get something of presumably greater value.  However, often parties to contracts are seeking to exchange intangible items.  Unlike donuts and cash, intangible items might be something like a promise to provide a service.  A good example of this is the arrangement you have with your cell phone company.  The cell phone company promises to give up cellular bandwidth in exchange for your promise to pay them for such use at the end of each month.

Mutual Assent

Mutual Assent is another legal term for a shared understanding of contractual obligations between parties.  In other words, mutual assent is present whenever there is an offer from one party that is accepted by the other party.  Going back to the donut example, the grocery store offers the donuts for a specified price.  This is the offer.  When you give the cashier the asking price for the donuts you are accepting the offer and entering into a binding and enforceable contract.  Mutual asset cannot exist until both parties understand and agree to be legally bound by their respective obligations.

Most simple contracts do not require the assistance of counsel.  Contracts are really just common sense.  However, if you are an entrepreneur, doctor or other self-employed professional you will eventually get into more complicated transactions where legal technicalities will be ever present.  It is in these instances when you should have a professional draft and review your agreements.  A major cause of expensive business litigation is a poorly drafted contract.  Now you know contracts and knowing is half the battle!

Know Your State/City’s Laws
Your state and possibly city may very well have different property management laws. Some state’s, for example, require your lease agreement to have a warning for lead based paint for older buildings. This will also help you figure out what you can and cannot include in your lease agreement.

Make Your Lease Agreement as Clear as Possible
Loose language, confusing terms, slang, short-hand, and a poorly written agreement can be misinterpreted into an interpretation that may not be in your favor.

Include the Condition of the Rental Unit
If the rental property is in good condition with no problems or damages then include that, if there are problems or damage then you need to go into specifics.

State Your Pet Policy
Include whether or not you allow pet lovers to keep a pet on the rental property. If there are exceptions or restrictions list those too, you can get into for example the size of the animal you will allow, or the type of animals you allow or don’t allow.

State Your Right of Entry
Be careful though, each states requires a specific amount of time you must wait after you notify the resident(s) that you want to enter their residence.

Do You Require a Security Deposit?
If you do require a security deposit you must specifically state what is considered to be damage to the dwelling on the lease agreement. It is vital you clearly state the security deposit policy if you want to properly protect your legal right to keep that deposit.

Precisely State the Amount of Rent
Include when the rent is due and when it is considered late; this will protect you against legal recourse if the tenant is continually late. Do what you can to prevent misunderstandings.

Repairs Covered or Not Covered
It is the landlords responsibility to provide repairs for any fixtures, heating and cooling equipment, and included appliances.

Activities you Restrict
If there is something you just absolutely cannot tolerate from your tenants then include that on your lease agreement. A code of conduct will give you the legal right to manage your property accordingly.

If the Lease Agreement is Breached What Will Happen?
State what will happen if the tenant violates the lease agreement. If you want the right to terminate the lease if the tenant breaches the agreement made then you need to state that.