The world of business is built off of agreements between two parties. In some instances, a contract won’t be necessary for these arrangements, but often they will be. In certain instances, you’ll be able to create the terms of these contracts for yourself.
Learning how to draft a basic business contract is a skill that many novice first-time business owners neglect to learn. This is a mistake or blind spot that can really come back to haunt you later on.
What do you need to learn about developing business contracts? Read on and we’ll walk you through what you need to know.
What is a Business Contract?
There are all kinds of arrangements you have to get into to properly operate a business of any size. Contracts are in place as evidence of these agreements. One exchanges one thing for another, such as money for a product, or the investment of time for a share of profits.
You’ll need to draft up all kinds of contracts with vendors, employees, investors, and so forth to ensure that your business keeps on working as it should over the course of its lifespan.
A contract must meet certain criteria in order for it to be legally enforceable. Once you meet these criteria, the contract is ready to be used in a court of law to help resolve conflicts between the two associated parties.
If one member of a contract thinks that their agreement is breached, they can bring a lawsuit forward against the party who has breached the contract.
It is then the duty of attorneys and the court to determine whether or not the contract has truly been breached. In some cases, certain circumstances might negate a breach.
Essential Elements of a Business Contract
What are the requirements for a contract to be considered a valid and legally viable document? There are a number of qualifications a contract must reach.
First, every business contract must include a specific offer and the signee must accept that specific offer of their own free will. Neither party can be forced into signing a contract and both parties must agree to the terms as written. The intent is important and must exist for both parties.
There also must be something of value exchanged between the two parties in order for the contract to be considered legally viable. Most often, this will be either money or services rendered. Both parties must contribute something.
Last but not least, both parties must be of sound mind. That means they need to be able to comprehend the seriousness of the contract and show evidence of full understanding.
They cannot be a minor, or under the influence of drugs or alcohol at the time of signing. If even one of the two parties is not competent at the time of signing, the contract could be thrown out.
There is also the matter of the purpose of the contract. There must be a legal purpose for the contract to exist, as most business matters would be. You can not enter into a contract for something illegal, such as transferring drugs in exchange for money.
If there are any illegal terms within a contract, the court won’t be able to enforce it.
Putting Together a Contract Draft
If you’re new to creating a business contract, it may take you a little to get a hang of this kind of writing.
First, you’ll need to establish the parameters of the arrangement under discussion. What kind of deal are you making with another individual or entity? Put this into the most specific word choice possible and define all terms as necessary.
Once you’ve created a first pass at the document, consider putting it in front of the party that you want to eventually sign. They will likely have input and contributions they will want to make to the contract so that they feel secure in their side of the arrangement.
This is an opportunity for both parties to come to an agreement about the terms. Once the paper has signatures, the terms will be set and an unhappy party may not be able to renegotiate.
Don’t let any details slip away in your writing. This will be the document everyone returns to in regards to this arrangement, so it should have all the details that could ever be considered pertinent.
You may even want to include something of an escape clause for yourself. Termination clauses are often included in contracts to provide an opportunity for both parties to break their agreement if need be.
A termination clause often indicates how much notice is required before a contract can be broken and the kind of notification or communication that is necessary if this kind of action is to happen.
It’s wise, if possible, to have an attorney look over the contract after you’ve drafted it just to make sure it will be able to be legally enforced. Once all parties feel good about the contract, they can sign it online or in person.
Today, there are programs that allow you to create your signature online and use it anywhere, so signing a number of contracts virtually should be no problem at all.
Understanding a Basic Business Contract
It can be stressful to have to draw up a contract if you’re new to the practice. If you’ve never had to draft up a basic business contract before, the above information can help. With a little practice, you can feel much more confident in your writing.
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