Updated November 25, 2020:

General contracts are legal documents that outline the terms and conditions of an agreement and are signed by both parties involved. Small business owners should have a basic knowledge of contract law since they will likely enter into general contracts during the course of business. Even the most basic business agreements should be documented in writing and signed. 

A general contract clarifies the conditions of the agreement to make sure both parties have a clear understanding of what they are signing. This provides protection for both sides in case of breach of contract, and it increases satisfaction by cementing expectations and providing enforcement measures that bind both parties.

The negotiating and signing of a written contract is an important element in any successful business relationship, partnership, or deal. Having this document in place minimizes the possibility of errors and other misunderstandings to ensure that the relationship is profitable and successful for both parties.

A general contract for services, sometimes called a service agreement, is used to define the services provided by one business and received by an individual or other business. This document should record the price of the services, their duration, what obligations they include, and other key details. 

Dos and Don'ts

The following tips for general business contacts will help protect your business and strengthen your relationships:

  • Establish goals for the agreement before writing a contract. The intentions of both parties should be understood before they are permanently recorded.
  • Provide several days for each party to review and sign the agreement, including time to answer questions if required.
  • Before exchanging money or providing or accepting goods or services, make sure the contract is signed.
  • Provide one signed copy to the other party and keep one in your records.
  • Create an accessible, organized file for all your important business documents.
  • Have the agreement witness or notarized.
  • Err on the side of being over-inclusive rather than under-inclusive when it comes to writing the contract. All terms and expectations should be explicitly stated.
  • If your agreement is very complex, retain the services of a business attorney to help you draft a contract.

General Agreement Instructions

These are the provisions that are typically included in a general contract.

  • Introduction of Parties: the full legal names of the parties are listed along with designation of how they will be referred to in the remainder of the document (Party One and Party Two, for example). This section also includes the date.
  • Section 1 -- Party One Obligations: This details the goods, services, payment, or transfer of property that Party One agrees to provide party two. These obligations should be thoroughly delineated in clear, specific language. 
  • Section 2 -- Party Two Obligations: Repeat the process of Section 1 with the obligations that Party Two agrees to provide to Party One.
  • Section 3 -- Representation and Warranties of the Parties:  This section is optional and lists any additional assumptions, understandings, promises, and provisions that must be included, such as quality standards or guarantees.
  • Section 4 -- Additional Terms: This section should include any further information, such as the promise to protect confidential information.
  • Section 5 -- Arbitration: This section is optional and promises that in the event of a dispute, the parties will resolve it by binding arbitration instead of court litigation. With arbitration, a neutral third party reviews the terms of the agreement and the circumstances of the dispute and provides a binding decision. 
  • Section 6 -- General Provisions: These subsections include universal general contract language.
  • Section 6A -- Notices: Includes addresses to which legal and other official correspondence can be delivered.
  • Section 6B -- Successors and Assigns: Indicates that both parties need prior written consent of the other to transfer their obligations under the contract.
  • Section 6C -- Waiver and Amendment: States that any changes to the contract must be made in writing and signed by both parties.
  • Section 6D -- Entire Agreement: Avers that no other agreements about the issues in question will be honored.
  • Section 6E -- Severability: Protects the entire agreement even if certain parts are found to be invalid.
  • Section 6F -- Governing Law: Allows those involved in the agreement to indicate the state laws that should be used to interpret it.
  • Section 6G -- Voluntary Execution of the Agreement: Notes that all parties to the agreement have been given sufficient time to review and understand it, including review by legal counsel if applicable.
  • Section 6H -- Counterparts/Electronic Signatures: This indicates that even if the contract has been signed electronically, it remains legally binding.

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