Issues in contract law are something that every small business owner has to deal with. Even basic transactions constitute binding contracts, so you need to make sure you're up to date on the latest developments in contract law. It's also helpful to know about the most common issues in contract law, so you know what to avoid and how to use it to your advantage.

Issues in Contract Law: Everything You Need to Know

Pretty much every facet of your business will require contracts of some kind. Leasing commercial space, conducting transactions of any kind, hiring people, payroll, and more all involve contracts, so you need to make sure you know how to keep things in order.

The basics of contract law are fairly easy to understand. Only people who are at least 18 and of sound mind may enter into one. When one party involved in the contract is a legal entity like a corporation or LLC, they must have a legally authorized representative present. If any violation of the basic requirements occurs a the contract isn't enforceable.

Contracts come in a few different forms, most commonly in writing or an oral agreement. But most important contracts are in writing with the signatures of all included parties as required by law. Common contracts that often require written verification are sales of items over $500, a lease term that lasts longer than a year, and a sale of real estate. Many service contractors are also legally required to use written and signed contracts.

Legal Issues in Relation to the Contract

At the center of every contract is an offer or an agreement to do or not do something. This offer has all the details so the person agreeing to the contract knows exactly what they're getting into. Intention must also be made plain and clearly defined. Those requirements may sound basic, but it actually leaves room for many kinds of transactions or potential transactions not to have coverage under the law.

For example, auctioneers aren't contractually obligated to sell items they have on auction. An auction only expresses a willingness to sell rather than an offer itself. Conversely, a bidder can revoke their offer before the contract is final without issue as long as the auction has a reserve.

In some cases, contractors will have to bid on projects in order to get work. Their bids are legally binding once the party offering the project accepts the bid. Many of these kinds of contracts are additionally supported by surety bonds.

Other Problems of Contract Law

Contracts can get much more complicated if there are more than two parties involved. Since the initial structure of contract law focused on the traditional two-party system, multiple parties require special attention when determining liability and responsibility. Even when the two primary parties seek to change the terms of the contract, the degree to which the third-party can intervene is often unclear.

To resolve common problems with contract law, people will often resort to third-party arbitration. Not only is the process effective, but it's also generally cheaper than the alternatives. These arbitrators are usually experts in a field.

Six Legal Issues to Address When Negotiating Contracts

Every contract is unique, but there are some constants that stretch across all areas of industry. Make sure you address all of the following legal issues when you're negotiating contracts.

  • Confidentiality: Make sure that the terms of your contract are kept private between you and the other involved parties.
  • Sensitive Information: Some contracts may require you to hand over sensitive information regarding your business. If the other party in the contract is in the same business as you, and handing over information like customer data is unavoidable, consider adding a non-poaching agreement to your contract.
  • Bribery: This one may sound obvious, but it's important that you make a conscious effort to avoid bribery. That means you not only should not accept bribes, but you have to actively stop bribery too.
  • Hyperbole: Exaggerations and misdirection must always be avoided in contracts. Any agreement based on false information renders it invalid.
  • Advice: Before signing a contract, make sure you have a lawyer look it over.
  • Mistaken Agreements: Written and signed contracts aren't the only ones that are binding. Oral agreements over the phone are legally binding, as are email messages. Even performing actions indicative of the contract terms can be cited as legally binding agreement.

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