1. Legal Contracts
2. Understanding Contract Fundamentals: Determine Whether You Need to Create a Contract
3. Understanding Contract Fundamentals: Be Aware of the Basic Requirements of All Contracts

Understanding how to write contracts is imperative prior to any form of business transaction. When writing a contract, no matter how complex, first start with the basics. This will include the details of each party involved, the exchange of consideration, deadlines, and other key pieces of information. Once signed, a contract will become a legally binding document.

When entering a business partnership, this relationship needs to be given some serious thought. Do not rush into an agreement and make sure you have complete trust in the other party. This is even the case when entering a business partnership with a family member. In fact, some would agree that this step should be completed especially when entering a business partnership with a relative.

In a legal sense, a contract is an agreement made between two parties. This generally involves an exchange of things for value, such as trading cash for goods and services. Although a handshake agreement is technically legal, its terms are not typically provable in the case that an issue arises.

In contrast, a legally binding document doesn't need to include pages upon pages of information. When conducting a simple business transaction, a basic contract agreement is typically all that's required. Within this contract, you will need to specify the terms of your agreement. This includes deadlines, exchanges, and payment terms.

Once a contract is complete, this document legally binds two or more parties. These parties can either be businesses, individuals, or institutions. By creating a business contract you can prevent any misunderstandings in the future. The following tips will help you write a business contract.

  • When writing a business contract, you will want to be mindful of two things. First, does your agreement address all possible circumstances? Second of all, are all of the terms crystal clear? If there is any ambiguity this could lead to future disputes.
  • In terms of state laws, there are only a few types of contracts that must be in writing. These include contracts such as those that cover more than a year, and a mortgage contract. However, when conducting any business, it is recommended that you create a written agreement.

Understanding Contract Fundamentals: Determine Whether You Need to Create a Contract

If you are exchanging anything of value with another party, including physical goods, labor, or even intellectual property, you should create a contract. For most people, contracts are generally signed when buying a car, purchasing a home, or when accepting employment. However, there are many other situations where a contract is highly recommended.

When creating a business contract, this will cover all the terms associated with that business transaction or partnership. All business relationships thrive when contracts are involved, as this ensures that all parties are aware of their personal goals and responsibilities. In fact, as a business, you may require a contract when:

  • You enter a partnership
  • Buy or sell goods/services
  • Sell or rent an estate
  • Enter a franchising deal
  • You accept work as a freelancer, such as a writer or contractor
  • Hire a contractor or service worker

Creating a clear and concise document will help ensure that everything is explained in detail. This will help protect both parties in the future if there is ever a dispute.

Understanding Contract Fundamentals: Be Aware of the Basic Requirements of All Contracts

When creating a contract, it must have three key elements:

  1.  An offer
  2.  An acceptance of that specific offer
  3.  A consideration in terms of what each party will receive

The terms used should be fully understood by both parties and you should not need a lawyer to interpret it. This is particularly the case when writing a small-business contract. There is no need to overcomplicate this process. Use plain English and be clear.

It's better to use simple language and make sure that each term is clearly defined. This will also ensure that all parties understand their own obligations. Each business contract should include key pieces of information, including the specific date of your contract, the names of each party involved, deadlines, payment amounts, and a contract expiration date.

When writing contracts, it is important to practice due diligence. By solidifying an agreement in writing, you will benefit from a legal document. This means that in the future, there will not be any complications or misunderstandings.

If you need help with understanding how to write contracts, 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.