Basics of a Business Contract

A contract is a very important tool when it comes to legal processes because it covers the details concerning obligations and limitations that a party is subjected to for a certain amount of time. The purpose of a contract is to provide assurance that the specifications listed in the contract will be carried out. It does this by listing the details of the applicable transaction as well as the actions that need to be acknowledged.

The following are reasons why a contract letter is important to the involved individuals or parties:

  • It informs them of their rights and duties as assigned by the contract.
  • It informs them of the policies and rules provided by the contract.
  • It assists in studying the details of the contract so that they better understand all that it entails.

A contract must be extended under certain circumstances, such as:

  • The timeline of a project is not followed resulting in an incomplete project.
  • The project runs out of financing during the contract period causing a delay in certain steps of the project.
  • The contracted employee did such a good job that the hiring company decides to hire him or her for additional projects.

Occasionally, a contract termination is issued to those involved to cancel the following:

  • The contract.
  • The agreements that were included with the contract.

The following are reasons for a contract termination:

  • A project has been discontinued, resulting in a cancellation of the steps to complete it.
  • The contracted employee breaks a rule or policy of the company that is considered cause for termination based on the company's policies and guidelines.
  • A product does not live up to its expectations, resulting in the need for a contract termination so that the purchaser can get his or her money back.

Basics of a Contract Agreement Letter

A contract agreement letter is created between two individuals or groups for the purpose of establishing a successful contract. This contract can cover any transaction, such as:

  • Purchasing property.
  • Distributing a product.

It is important that both individuals or groups understand the specifications and rules that are laid out in the agreement letter so that there is no confusion later on in the contract period.

An additional agreement is signed upon the establishment of a contract agreement letter so that each individual or group has the following:

  • Proof of the agreement.
  • Protection of his, her, or their business.

Upon receipt of an order, an individual or business must create an agreement later stating both his, her, or their acceptance of the order and agreement of the conditions laid out in the contract. The other individual or business must then provide assurance of his, her, or their commitment to providing the best service available.

Tips for Writing a Contract Agreement

When writing a contract agreement, individuals or parties should adhere to the following guidelines:

  • The terms and conditions should be clear and concise.
  • The individuals' or parties' interests should be adequately covered.
  • The applicable product or service, time period, amount, and quality should all be discussed in detail.
  • Guidelines should be listed concerning a violation of the contract by either individual or party.
  • Personal pronouns such as I, we, and you should be used.

Although referring to oneself as "I" is proper and encouraged in professional letters and documents, individuals or parties should be careful when using "we" in reference to their company. By doing so, commitment is being made by the company and not just the individual or party.

Furthermore, the avoidance of passive voice by the individual or party is recommended. This allows for a clearer message and an agreement letter that should not be misunderstood. Aside from its unclear messages, the use of passive voice can also result in a boring and impersonal letter.

The following is an example of passive voice:

  • The net income of department one was vastly underestimated.

This statement leaves the reader wondering who it was that underestimated the net income.

The following is an example of active voice:

  • The departmental finance team vastly underestimated the net income of department one.

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