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Principles of Contract Law Every Business Owner Should Understand

Principles of Contract Law Business Owners Need to Know

When you own or run a business, getting your contracts right can make or break you. Here are the primary principles of contract law you need to understand.

Not everyone went to college and earned a bachelor’s in business management. But this doesn’t mean it’s too late to learn the ins and outs of operating a business. A lot of people open up shop with little business knowledge and still succeed.

However, there’s a major learning curve along the way. A part of this learning curve is learning and understanding contracts and how they work.

As you know, contracts are a major part of the business world. And so it’s very important to know the principles of contract law. This can help keep you and your brand out of unfavorable situations that are legally binding.

Let’s take a sneak peek.

The Offer and Acceptance

Obviously, everyone involved in signing a contract should be of legal age, sober and in good mental capacity. From here, you can enter into the offer and acceptance phase.

There’s no contract to be made if there’s no offer that was accepted by at least two parties. The one receiving the offer has the option to reject, accept or counteroffer. And this is where the negotiating begins.

Then the first party to make the offer will have the same options. Once everyone is in agreement, you can go into the next phase.

Payment for the Contract’s Performance

After entering into a contract, there is an exchange of value based on the performance of the contract. This can be in the form of cash, services or goods. For instance, if you enter into a contract for inventory, you make good on it by paying for the merchandise.

If the business owner enters into a contract that’s too favorable and the consideration is inadequate or unstated, then the court can determine whether it’s a gift.

In this case, it would render the contract unenforceable.

Verbal vs Written Contracts

Now, it’s important to note that the principles of contract law state you can enter into a contract verbally or in writing. All that’s required is that two or more parties give consideration or something of value in exchange for the other party’s promise.

Although you can verbally enter into a contractual agreement, it’s important to still get it into writing, so you can iron out all the terms and conditions. This will help prevent problems with miscommunications and misunderstandings that can put you into an expensive legal battle.

Written agreements will also make it easier for the court to make legal decisions.

One way to secure the terms of a contract is to use surety bonds. But this is a topic for another article.

Putting to Use the Principles of Contract Law

There’s a lot you still have to learn about contract law, but the above fundamentals are a great place to start. If you can’t afford to hire an attorney to handle your contracts, then you should at least pay for consultations and guidance.

You can also use web resources to make handling legal matters easier. For instance, you can visit At Your Business to find business forms for just about everything. We also offer a variety of templates and tutorials for rental agreements, employee performance, purchasing & receiving and much more!

Stop by our site today to see how we can make your business transactions smoother.