How to Make a Legally Binding Contract

Originally published on 14 November 2023. Last updated on 10 December 2025.

Contracts are the foundation of secure business and legal dealings, ensuring trust and accountability from all parties involved. In today’s digital era, it’s critical for organizations to understand what makes a contract legally binding — especially as business transactions are increasingly completed online with digital signatures. As digital workflows continue to expand in 2026, knowing how legally binding documents work is more important than ever for organizations of all sizes.

We’re exploring the key elements of a binding contract and how cutting-edge e-signature solutions can simplify the process for your team moving forward.

What is a Legally Binding Contract?

A legally binding contract is an agreement between two or more parties that creates mutual obligations enforceable by law. When a contract is deemed legally binding, it means that if one party fails to fulfill their promises, the other party has legal recourse and can take the matter to court to seek a remedy. These documents specify the terms of a formal arrangement, detailing the rights and responsibilities of everyone involved.

Common examples span nearly every aspect of life and business, including:

• Employment agreements that outline job duties and compensation.
• A Lease Agreement for renting a home or leasing office space.
• Sales agreements for the purchase of goods or services.
• Complex franchise agreements governing business operations.

Unlike informal promises or non-binding agreements like a Memorandum of Understanding (MOU), a legally enforceable contract carries significant weight. If a party violates the terms, it can lead to legal consequences for the breach of contract. Recognizing this distinction is critical to safeguarding your interests.

Does a Contract Have to Be in Writing?

The short answer is no: Both a written and verbal agreement can serve as a legally enforceable contract. A verbal contract can hold up in court in many situations; however, proving its existence and specific terms is often a significant challenge. This makes verbal agreements an inherently risky option for important legal dealings.

What’s more, in accordance with the Statute of Frauds requires certain types of contracts to be in writing to be valid. These typically include:

• Real estate contracts, including the sale of land or property.
• Agreements that cannot be completed within one year.
• Contracts for the sale of goods above a certain value (as defined by state law).
• Agreements to pay someone else’s debt.

Even when not legally required, putting any significant agreement in writing—whether through traditional handwritten contracts or digital documents—is always the best practice to protect all parties and provide clear evidence in case of a dispute.

Is a Wet Signature or Electronic Signature Better for Signing a Contract?

A written contract only becomes a binding agreement with the addition of an official signature from the parties involved. Today, organizations can sign documents with a wet signature, done manually with ink on paper, or electronic signatures, which are digital representations of their written alternative. While wet signatures are a traditional option and widely accepted, recent years have seen a fast-paced adoption of e-signatures for the speed, convenience and enhanced security they offer in digital landscapes.

As of 2026, electronic signatures continue to be widely adopted due to their speed, security, and compliance with global e-signature laws. According to a recent study by AirSlate, the number of e-signature adopters among businesses has increased by 50%, while everyday households have added an additional 13% of adopters.

The Essential Elements of a Legally Binding Contract

A legally binding agreement is built on two fundamental elements: an offer and an acceptance. The offer specifies what one party is willing to provide, and the acceptance indicates an agreement to those terms. This must include an exchange of value, which may take the form of services, goods, money or even a commitment to provide one of the above. 

While the specific factors of a valid contract can change depending on your organization’s state laws, here’s a closer look at the main elements of a legally binding contract:

1. Mutual Consent

Contracts start with mutual consent, where one party makes an offer and the other party accepts it freely — without coercion or misrepresentation. This mutual agreement is the foundation of every valid contract.

2. Clear and Specific Terms

A legal contract must have clear and specific terms that leave no room for misinterpretation, from either side of the deal or transaction. This is necessary to ensure all parties recognize and understand their responsibilities, along with what they can expect in return.

3. Consideration

A critical component of contracts is adequate consideration, where each party provides something of value. This might include money, goods, services or a promise to provide one of these in the future. A mutual exchange ensures that all invested groups benefit from the arrangement.

4. Legality

It’s imperative that the purpose and subject matter of any contract your organization enters is lawful. It’s safe to assume that contracts involving illegal activities or those violating public policy will likely not be enforceable in a court of law.

5. Legal Capacity

All parties involved in a business contract must have the legal capacity to enter the agreement. This essentially means that all associated individuals must be of sound mind and of an age where they can legally enter contracts. Keep in mind that any agreements made with minors or individuals lacking mental capacity may not be legally binding.

6. Signatures

The signing of the contract is the final act that formalizes the agreement. Finally, a valid contract must be signed by the parties involved, taking into consideration any specific formalities associated with the jurisdiction or the nature of the arrangement. In regard to digital contracts, organizations can rest assured that the United States Electronic Signatures in Global and National Commerce Act of 2000 (E-Sign Act) and the Uniform Electronic Transactions Act of 1999 (UETA) have established the legal standing of e-signatures for decades.

The surge in global e-commerce and fast-paced digital transformation is now accelerating the deployment of e-signature solutions by businesses that require the signatures of third-party partners including HR, sales, accounting and legal departments across industries. A reliable and smart e-signature solution like DottedSign makes it simple to streamline the document signing and contract management process.👉You can talk with our team to get started!

How Can a Contract Be Signed?

To validate a contract, both parties must sign it and solidify their agreement to the established terms and their commitment to fulfill its obligations. Traditionally, physical signatures were more common and widely accepted, but there are a few things to consider when taking this approach:

• Sign written contracts in blue or black ink for clarity and better legibility. Blue ink is a particularly good choice if you plan on making copies because it’s easy to distinguish from the original.
• Signatures can be in cursive or print, as long as there is authenticity and intent. However, cursive can be a better choice for wet signatures because they’re more distinct and harder to forge. 
• After a contract has been signed, initials are a common way to acknowledge small changes or updates that are made to the document. Be sure to include the date and ensure all parties have updated copies for added security.
• Depending on your jurisdiction and the document, it can be beneficial to initial each page to confirm completeness, prevent unauthorized additions and provide additional assurance.

How to Electronically Sign a Document

As of today, advancements in technology and the rise of international business have made electronic signatures a popular and legally recognized alternative. Here are the steps to electronically sign a document:

1. Choose a reliable e-signature tool: Utilize a reputable electronic signature platform like DottedSign to ensure simplicity, legal compliance and security throughout the process. 
2. Upload your document(s): With a dependable tool, you can start by uploading the documents or contracts that need to be signed directly into the platform. Make sure it’s in a compatible format like a PDF. 
3. Add signatures: Use the solution’s tools to add your e-signature or digital initials. 
4. Position and size: The DottedSign platform allows you to adjust the signature’s position and size, so it fits properly in the document. 
5. Review and confirm: Finally, carefully review your signed document to ensure accuracy, then confirm and send it. This contract is now officially electronically signed and can be shared or downloaded as needed.

✍️Learn more about how to sign an agreement on DottedSign

Are Electronic Documents Legally Binding?

Yes. Electronic documents and signatures are legally binding under the ESIGN Act and UETA in the United States, as well as eIDAS regulations in the EU and similar laws worldwide.As long as a document includes the essential elements of a valid agreement—clear terms, mutual consent, consideration, and proper authentication—it carries the same legal weight as a paper document.E-signature platforms like DottedSign strengthen this validity by providing secure audit trails, identity verification, timestamps, and tamper-proof digital certificates.

Answering Legally Binding Contract FAQs

What makes a document legally binding?

A document becomes legally binding when the parties clearly agree to the terms, provide consideration, have the legal capacity to enter the agreement, and sign the document. Without these elements, the document may not be enforceable.

Are electronic signatures legally binding?

Yes. Electronic signatures are legally binding in the U.S. under the ESIGN Act and UETA, and internationally under similar regulations. E-signature tools ensure compliance with authentication, audit trails, and digital certificates.

What types of documents can be legally binding?

Employment agreements, NDAs, lease contracts, sales agreements, partnership contracts, consent forms, and service agreements can all be legally binding when properly executed.

Can a PDF be legally binding?

Yes. A PDF becomes legally binding when it includes clear terms and is properly signed—whether with a wet signature or an electronic signature. Tools like DottedSign help verify signer identity and document integrity.

What is a Contract Witness?

For certain high-stakes documents, a signature alone may not be enough. A contract witness is an impartial third party who observes the signing of the contract to verify the identity of the signers and confirm that they signed the document willingly. This adds an extra layer of security and authenticity.

Documents that often require a witness or a notary public (a state-appointed official who can certify documents) include wills, deeds for real estate transactions, and a Power of Attorney. The witness must be of legal age, mentally sound, and should not be a party to the contract or stand to benefit from it.

Can You Amend a Contract After Signing It?

Yes, it is possible to change a contract after it has been signed, but it must be done correctly. These changes are known as contract amendments or addendums. For an amendment to be valid, all original parties to the contract must agree to the proposed changes.

There are two common ways to amend a contract:

1. Direct Changes: Make handwritten changes directly on the original document, with all parties initialing and dating next to each change to signify their consent.
2. Contract Addendum: Create a separate document that outlines the specific changes being made to the original agreement. This addendum should reference the original contract and be signed and dated by all parties.

With DottedSign, your business can further safeguard against unauthorized modifications to a signed contract with robust security measures. Not only does the platform generate a comprehensive audit trail to record every action taken by signers, but it also serves as incontrovertible evidence to ensure a document’s legality. And, the implementation of AATL digital certificates guarantees a document’s integrity and completeness, so you can rest assured that the contract hasn’t been altered or modified without the proper acknowledgment.

How Do You Terminate a Contract?

There may come a time when you need to terminate a contract. The method for doing so depends heavily on the terms outlined within the agreement itself and the circumstances surrounding the termination. If you find yourself in this situation, it is often wise to seek legal advice.

Common methods for termination include:

• Termination Clause: Many professional business contracts include a clause that specifies the conditions under which the agreement can be terminated, such as providing a 30-day written notice.
• Mutual Agreement: All parties can agree to cancel the contract. This should be documented in a separate termination agreement that releases all parties from their original obligations.
• Breach of Contract: If one party fails to fulfill its material obligations, the non-breaching party may have the right to terminate the contract. Proving a breach of contract can be complex, and consulting a law firm or experienced contract lawyers is highly recommended.
• Invalidity: If it can be proven that the contract was invalid from the start (e.g., one of the essential elements was missing, or it involved fraud), it can be nullified.

Is an email legally binding?

In some cases, yes. If an email clearly expresses agreement and intent to be legally bound, it may be enforceable. However, using a formal contract or e-signature platform is a much more secure approach.

What invalidates a legally binding document?

A document may be invalid if it lacks required signatures, contains vague terms, involves coercion or fraud, or if one party lacks legal capacity. Illegality or document alteration can also invalidate an agreement.