Contracts are the foundation of every business relationship. Whether you’re buying or selling goods, partnering with another company, hiring employees, or leasing property, contracts define your rights and obligations.

With Thooft Law LLC in Eagan, Minnesota, you gain a seasoned legal partner dedicated to crafting, reviewing, and negotiating contracts that safeguard your interests and propel your business forward. Combining experience with meticulous attention to detail, we make sure your agreements are clear, enforceable, and strategically aligned with your goals. 

Whether you’re a startup, growing enterprise, or established corporation, depend on us to deliver reliable, tailored legal solutions that give you confidence and peace of mind in every transaction. Contact us today for a consultation on your business law needs.

What Is a Business Contract?

A business contract is a legally binding agreement between two or more parties that creates enforceable obligations. These agreements can be written or oral but are most often documented in writing for clarity and legal protection.

Business contracts encompass a broad spectrum of transactions, including the purchase and sale of goods, service agreements, employment contracts, leases of commercial property, partnership and joint venture agreements, franchise agreements, and licensing and distribution agreements. These agreements establish the structure for various business relationships.

Elements of a Valid Contract in Minnesota

To be legally enforceable, a contract in Minnesota must contain five essential elements:

1. Offer: One party makes a clear and definite proposal to enter into an agreement. The offer must express the terms so the other party can accept or reject.

2. Acceptance: The other party must accept the offer unequivocally. Acceptance must mirror the terms of the offer, especially under Minnesota’s common law. The Uniform Commercial Code (UCC), which governs contracts for goods, allows some flexibility regarding acceptance.

3. Consideration: There must be a bargained-for exchange of value — something of legal value must be given or promised by each party. This could be money, services, or a promise to act or refrain from acting.

4. Capacity: The parties must have the legal capacity to contract. This means they must be of legal age and sound mind. Minors and persons with certain mental incapacities typically can’t form binding contracts.

5. Legality: The subject matter of the contract must be lawful. Contracts for illegal purposes are void and unenforceable.

These five elements—offer, acceptance, consideration, capacity, and legality—are the bedrock requirements for a legally sound and enforceable contract in Minnesota. Each plays a crucial role in confirming the agreement is valid under the law.

Sources of Contract Law in Minnesota

Contract law in Minnesota is derived from three primary sources: common law, the Minnesota Uniform Commercial Code (UCC), and statutory law, each governing distinct types of agreements.

Common Law

Most business contracts, particularly service contracts, leases, and employment agreements, fall under common law, which is judge-made law derived from court decisions. Minnesota courts interpret and apply general contract principles when disputes arise.

Minnesota Uniform Commercial Code (UCC)

Minnesota has adopted the Uniform Commercial Code (UCC), which specifically applies to contracts for the sale of goods. The UCC modifies traditional contract rules to better suit commercial transactions by offering more flexible standards for offer, acceptance, performance, and available remedies.

Article 2 of the UCC governs sales contracts, while Article 2A covers leases of goods. Article 9 of the UCC regulates secured transactions that involve collateral. The UCC applies to goods but not to services or real estate.

Statutory Law

Other Minnesota statutes govern specific contracts, such as real estate contracts, franchise agreements, or contracts with government entities. Additionally, the Statute of Frauds requires certain contracts to be in writing to be enforceable.

Understanding the applicability of common law, the UCC, and specific Minnesota statutes is crucial for businesses to traverse their contractual obligations and rights effectively.

Contract Formation in Minnesota

Contract formation in Minnesota necessitates several key elements, including offer and acceptance, consideration, capacity, and legality, each playing a vital role in creating a binding agreement.

Offer and Acceptance

The formation process for business contracts starts with an offer and acceptance. An offer must be sufficiently definite in its terms, including price, quantity, and subject matter. Minnesota courts require the acceptance to be the “mirror image” of the offer under common law.

However, the UCC relaxes this rule for the sale of goods. Acceptance can include additional or different terms without necessarily rejecting the offer, provided the acceptance is made in a timely manner.

Consideration

Minnesota law requires consideration as the price of the promise. The consideration must be legally sufficient but need not be adequate (i.e., parties don’t have to get an equal bargain). Gifts or gratuitous promises generally aren’t enforceable contracts.

Capacity

Minors, persons under guardianship, or individuals lacking mental competence generally can’t enter binding contracts. If a minor enters a contract, it’s typically voidable at the minor’s discretion.

Legality

Contracts must not involve illegal activity or violate public policy. Illegal contracts are void and unenforceable.

Statute of Frauds

The Statute of Frauds in Minnesota requires certain contracts to be in writing to be enforceable, including:

• Contracts for the sale of goods priced at $500 or more (per the UCC).

• Contracts that can’t be performed within one year.

• Contracts involving the sale or transfer of real estate.

• Surety agreements (promises to pay the debt of another).

If these contracts are only oral, they generally can’t be enforced unless exceptions such as partial performance apply.

Understanding these fundamental aspects of contract formation, along with the Statute of Frauds' requirement for written agreements in specific circumstances, is crucial for businesses to make sure their contracts are legally sound and enforceable in Minnesota.

Written vs. Oral Contracts

Although oral contracts can be enforceable in Minnesota, written contracts are preferable for business dealings. Written contracts provide clear evidence of the agreement’s terms and reduce misunderstandings.

For transactions involving real estate or goods over $500, the law strongly favors written agreements.

Contract Interpretation

When disputes arise, courts look to interpret the contract to determine the parties’ intent. Minnesota courts apply several key principles:

• Plain meaning rule: Courts first look at the contract’s language. If the terms are clear and unambiguous, the court enforces the contract as written.

• Ambiguities: If the language is ambiguous, courts construe the ambiguity against the party who drafted the contract (contra proferentem).

• Parol evidence rule: When parties have a fully integrated written contract, evidence outside the contract generally can’t be used to add to, vary, or contradict its terms — with some exceptions like clarifying ambiguities or showing fraud.

• Trade usage and course of dealing: Courts may consider the parties’ prior conduct or customs in the industry to interpret unclear terms.

In interpreting contracts when disputes arise, Minnesota courts rely on key principles such as the plain meaning rule, addressing ambiguities against the drafter, the parole evidence rule limiting extrinsic evidence for fully integrated agreements, and considering trade usage and course of dealing to clarify unclear terms.

Common Business Contract Types in Minnesota

Minnesota businesses commonly utilize several types of contracts to structure their operations.

Sale of Goods Contracts

Contracts involving the sale of goods (tangible personal property) are governed by the UCC Article 2. These contracts must meet UCC requirements for formation and performance, with special rules regarding warranties, delivery, and acceptance.

Service Contracts

Service contracts fall under common law. These include agreements for consulting, repairs, or professional services.

Employment Contracts

Minnesota employment contracts define terms of employment, including duties, compensation, and termination. Minnesota is an “at-will” employment state, meaning employers or employees can generally terminate employment at any time, but written contracts can override this default.

Lease Agreements

Commercial leases for real property are governed by Minnesota real estate and contract law. Leases must comply with the Statute of Frauds.

Business contracts law in Minnesota provides a structured legal process that supports predictable commercial dealings. Knowing the elements of contract formation, interpretation, enforcement, and remedies helps businesses enter agreements with confidence and handle disputes effectively.

Whether you’re drafting a purchase agreement, employment contract, lease, or any business arrangement, understanding Minnesota contract law principles is essential. When in doubt, consulting with a Minnesota business attorney can help protect your interests and confirm compliance with the law.

Speak With a Business Contracts Attorney Today

If you have questions about your specific business contract or need assistance drafting or reviewing contracts in Minnesota, reach out to Keats McGraw and Derek Thooft. We serve clients in Eagan, Minnesota, and throughout the Twin Cities area, including Minneapolis, St. Paul, Eagan, Inver Grove Heights, Woodbury, Maplewood, Roseville, Fridley, Plymouth, Minnetonka, Edina, Richfield, Bloomington, and Apple Valley. Give us a call today.