Components of a Contract Document
Components of a contract document are usually fairly large in number.3 min read
Components of a contract document are usually fairly large in number. The importance of including all of these elements is to ensure that the agreement being made is legally binding. These elements also help mitigate misunderstandings that often arise when the elements are not present. The elements themselves do not have to be a particular length, but the longer they are, the better. It does not matter whether a contract is written or oral, it can still be enforceable. However, written contracts are generally easier to enforce than verbal ones.
Elements of a Contract
The parties that are taking part in an agreement are the first element to include in a contract. For example, you will want to list the name of the business providing the service and the name of the entity receiving the services. Let's say you are a product manufacturer and you are hiring a marketing firm to market your product. The marketing firm would be the entity providing the service, and you would be the party receiving the services.
You will need to identify the parties involved in the agreement by stating their name, what industry they operate in according to the services being received and provided, and where the entities are located. There is often a line or space on the contract that will be labeled as the "payee" spot; this is where you will put the name of the entity that is paying for the services. The name of the person providing the services will go in the "providing services" name spot.
Types of Contract
There are four basic types of contracts:
What Is a Contract Background Section?
Frequently a contract will include a section called a background section. You will need to make sure this section is extensively detailed. It will go into great detail regarding the transaction that is taking place, including who is receiving what, who is providing the service, and the purpose of the contract. It's important to note, however, that this section does not constitute any type of operative agreement; this is found later in the document.
The agreement that is being made between the parties involved, which may include more than two parties, is referred to as a consideration. The agreement itself may include only one or two sentences, or it may go into much greater detail and could possibly be several paragraph or pages long. This where you will be able to tell how many parties are involved in the contract.
Why Should Contracts Include a Provision?
Sometimes, the lengthy and detailed part of the document is included in a section labeled as "terms." To provide protection to all of the parties involved, it is extremely important that all contracts include a provision.
It is not uncommon for this part to be referred to as an integration clause. This type of contract clause outlines how the agreement that is being made between the involved parties is the only connection the two have to one another in regard to the agreement being made. It will also stipulate that the only way any changes can be made to the contract is if they are amended in writing.
The pertinence of this type of clause can help enforce contracts and keeps parties from saying something similar to, "Well, two weeks ago in a telephone conversation with a company representative, I was told I didn't have to have the project completed until two weeks after the deadline that is outlined in the agreement."
It's also important to consider whether or not you want a contract to include a choice of law provision. In fact, it's very important to ensure it contains this type of provision if you and the involved parties operate out of different states. The choice of law provision dictates which state's laws are going to govern the enforcement of the contract in the event that some type of issue arises.
Why Do Contracts Have to Be Signed?
All business contracts must be signed by each party involved in order for it to be considered a legally official contract. Signing the document ensures that all parties involved have read through the terms and conditions of the contract and that they all agree on the services to be provided and what is going to be paid for the services.
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