Business Contracts – An Overview
Words have a lot of weight, but only if they can be seen or proved that they were agreed upon. Many a times an agreement may occur orally with our trust in the other as a security. Yet even these trustworthy agreements can go wrong if they are not carefully prepared and everyone understands their terms. Although a contract can be oral under certain circumstances, it is always advisable to put things in writing so the terms and the agreement may be reviewed by the Courts if necessary.
Contracts can occur between two or more parties / entities / or individuals agreeing to abide by certain obligations or a set of legally binding terms. Business contracts are preferred because they serve as an acknowledgment of the counterparty to rely on its obligations and in case of breach of any terms can be used as proof to claim damages in Court or arbitration.
- Business Contracts between Companies – many businesses cooperate and engage in joint endeavors for better results and value added. In most cases, companies share many internal information about the company’s procedures, processes and strengths and weaknesses. (This is known as a non disclosure agreement). This information can be critical in the wrong hands and therefore as a precaution companies agree to the non – disclosure of such secrets Companies also enter into various other agreements such as lease, supply, buy & sell to ensure security of their interests and also to ensure that the counterparty does not take advantage of their position.
- Business Contracts between a Company and an individual – there are many contracts between individuals and companies. In fact, in every business transaction, there usually is a contract even if you are not aware of it. For instance, when you purchase an item with a credit card at a store, you have entered into a contract with your credit card company and oftentimes, with the store as well depending on the terms associated with the receipt you are asked to sign. These contracts have mostly standard terms which mean that they are similar for the masses and are usually non – negotiable offers such as insurance contracts, loans, bank accounts, employee & wage contracts, etc.Sometimes contracts are drafted particularly for the individual as in case of patent usage, celebrity brand, or a unique transaction.
What Constitutes a Contract?
Business contracts can be drafted to constitute different clauses and conditions, but the core of the contract is defined by a set of universal elements. These elements are –
- Meeting of Minds: this is the core reason for forming a contract and contains the particular deed or offer and any action pertaining to the deed or offer over which the two parties have agreed upon. This also includes any other subelement such as stipulated date & time, length of the contract, the
quantityof materials etc.
- Ascent: this is usually the signature of the parties proving their acceptance to willfully adhere to the contract.
- Consequences: this mentions the consequences or the liability which the contracted parties bear if they breach the contract, or fail to deliver upon the agreed terms.
- Consideration: the consideration is the amount
or benefitthe party is will exchange for its demands.
Importance of using an Attorney to Review and or Draft Business Contracts
Contracts are legally binding terms and conditions which are drafted which make use of a plenty of legal esoteric terms. These legal terms may be interpreted to have different meanings. This may be used against the party or individual and hence it is necessary to seek legal advice before drafting or entering into a contract Additionally, different laws apply to different jurisdictions. This is very important to consider as some terms of a contract may be unenforceable in one State, but enforceable in another. That is why it is always prudent to consult a lawyer anytime you are entering into a business contract.