Bacis Contract Terms: Everything You Need to Know
Basic contract terms must be included in any contract you are in the process of forming.3 min read
Basic contract terms must be included in any contract you are in the process of forming. Contract terms are the provisions that form the bulk of content that appear in a contract. These are some of the essential components that must be included in a contract in order to make it legally binding:
- Parties who are not under 18 years of age and/or who are not mentally incompetent (otherwise, the parties won't meet the legal standard to enter into a contract).
- An offer.
- An acceptance.
- A mutuality of agreement and valuable consideration.
- Lawful subject matter.
Common Types of Business Contracts
Every day, people enter into all sorts of different contracts. Some of these common business contacts are sales-related, including warranties for a product or a bill of sale for a car. Other types of contacts are those that deal with employment-related issues. A contract with a non-compete clause or a consulting agreement are examples of employment contracts.
There are also various other types of common contracts, such as leases on houses or apartments and joint venture agreements, which are contracts between two parties who are embarking on a collaborative project.
When you've decided on the type of contact you are writing, the next step is making sure that you meet all of the legal contract requirements.
The following is a list of contract terms that should be in your contract:
- Name of the parties (business name or individual's name).
- The type of business.
- Name of the person signing the contract along with their title.
- Signatures of authorized signatories.
- Notarization section.
- Address of the parties.
- Purpose of the contact.
Your contract should also contain the following terms:
- The rights of each party.
- Any pertinent dates.
- Any payment terms, including prices, payment terms, taxes, interest, or late fees.
- The warranties.
- The disclaimers and limitations on liability.
- A default arbitration clause.
How to Enter Into a Contract
Once you have written a contract and decided on its terms, you must now enter into the contract. To make the contract legally binding, both parties must agree to and fully understand all the terms of the contract. In other words, both parties must have a good understanding of the contract, their role in the contract, and what is expected of them.
Next, for the contract to be legal and enforceable, there must be an offer and an acceptance. An offer can be oral or written but must include a readiness to enter into an agreement. An acceptance means that both parties have accepted the exact terms of the contract. If you accept an offer, then you will not be able to change any of the terms of the contract afterward.
The basic contract terms must also be completely unambiguous and definite. For example, a contract with vague terms might state something like this: "I will buy your car for some amount of money." As you can see, those terms don't specify the exact amount of money. Instead, the terms should read like this: "I will buy your car for $500." That way it is clear to both parties what the terms are. In this case, the amount for the car is stated clearly.
An example where the terms of a contract were not clear and agreed upon is the Deep Blue Pools case. In this instance, a homeowner and Deep Blue Pools met and negotiated terms, agreeing to and signing a term sheet.
Later Deep Blue Pools disputed the agreed-upon terms. The case went to court, and Deep Blue Pools provided a recording of the meeting that showed the term sheet was not meant to be a binding agreement, only a promise to enter into a future agreement.
Eventually, the Court of Appeals sided with Deep Blue Pools. But this case proves the point that when a contract has sparse, ambiguous terms about who would pay who, how much should be paid, and when the payment should be made, then a contract can be difficult to enforce.
Always define your basic contract terms clearly, so that you can protect yourself if the other party in the contract tries to dispute the contract.
If you need help with basic contract terms, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.