Contract Commercial: Everything You Need to Know
A commercial contract is a binding agreement used for commercial purposes and businesses use this on a daily basis.3 min read
A commercial contract is a binding agreement used for commercial purposes. Businesses use a variety of commercial contracts on a daily basis, and there are several ways of forming these contracts.
Facts About Commercial Contracts
Commercial contracts are agreements between two parties that are legally binding. These agreements can either obligate performance of a specific act or can request that a party not perform an act. While most commercial contracts are in written form, these agreements can also be verbal or even implied.
A business can use a commercial contract for several purposes:
- Hiring employees.
- Defining wages.
- Acquiring leases or loans.
- Outlining procedures for employee safety.
When one of the parties in a commercial contract fails to uphold their responsibilities, this is a breach of contract. Commercial contract law covers several areas:
- The sale of services or goods.
- Transfer of property.
- Exchanging money.
- Writing employment contracts.
Both the common law and the Uniform Commercial Code (UCC) govern legal issues related to businesses. The UCC covers a wide range of commercial transactions. Lawyers can use the rules of the UCC to resolve disputes involving the sale of goods or services, warranties, investments, and other commercial business issues.
Commercial agreements usually involve two business entities, but can also be an agreement between a business and its customers. A commercial contract is also suitable for issues within a single business, such as employee wages and safety.
When a commercial contract breach occurs, the non-breaching party may file a lawsuit against the breaching party. If the party that filed the lawsuit can prove the breach, they may receive monetary damages. Generally, the intent of monetary damages is to place the injured party in the position that would have occurred had the contract been upheld.
There will usually be a statute of limitations that applies to commercial contract breaches. If a breach occurs and no one files a lawsuit before the statute of limitation expires, the injured party will no longer be able to seek remedies for the breach. In Florida for instance, the statute of limitation is five years from the date the breach occurred. This only applies for written contracts. The statute of limitations for oral contract breaches is four years after the breach.
To limit the possibility of contract disputes or a breach of contract, it's important to draft the agreement properly and make sure that all parties understand their responsibilities and their rights.
Enforceable Commercial Contracts
Commercial contracts, like most contracts, are subject to state law. Most states have adopted the rules for selling goods outlined in the UCC. For a commercial contract to be valid and enforceable, there first needs to be an offer by one party and acceptance of the offer by the other party. Basically, this means that parties must fully understand the agreement, including what goods are being sold, the price of the goods, and how to deliver the goods.
In a valid contract, both parties must provide something of value. This exchange of value is also known as consideration. In a commercial contract, consideration will usually involve exchanging money for a good or service. In some cases, consideration can involve one party requesting that another party refrain from performing a certain act which they have a legal right to perform.
Another important requirement of enforceable commercial contracts is that both parties are legally capable. This means that the parties must be able to understand the terms of the contract and that entering the contract means they will be legally bound by these terms. A person that is mentally impaired in some way would lack capacity, and the majority of states also have ruled that people under the age of 18 lack capacity.
Every party in a contract must have entered the contract willingly for the agreement to be legal and enforceable. If one party was in any way forced into the contract against their will, or deceived to get them to enter the contract, it's possible to terminate the agreement. A contract cannot be legally entered under duress. Finally, a valid contract must contain legal subject matter. You cannot use a contract to get someone to perform an illegal act.
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