What is a Legal Business Contract Between Two Parties?
A legal business contract between two parties is a promise made by one party to another.3 min read
A legal business contract between two parties is a promise made by one party to another. A contract is often called an agreement. Each party in the agreement expects the other to keep their promise in the contract.
There is an expectation by both parties that if one of them fails to keep their promise, there will be legal repercussions. A contract exists when there is a clear commitment. You cannot sue someone for breach of a contract, for example, for simply mentioning that he can paint an office space if he has some time in the summer.
Contracts Between Two Parties
Making a contract with someone for services, goods, or by entering into a partnership is a positive thing for both parties. Hope and optimism are not a guarantee that problems won't be encountered during the course of the deal. When two companies want to combine their resources for mutual business goals, they need to prepare a document that is a contract between two parties. You can hire a legal representative to help you draft a contract.
A contract between two parties contains details about the transaction such as names, description of the business activity, and terms and conditions. There are some general rules that contracts must follow in order to be enforceable, including having the contract in writing. The most common types of contracts that must be in writing are:
- Contracts concerning the sale of real estate
- Contracts with government authorities
- Contracts that cannot be completed within a year
While there's no consensus regarding business transactions, it's generally a good idea to put it in writing when a transaction is complex or would be difficult to prove otherwise. A business agreement is private, with no interference from the government or public. Exceptions to the rule are mortgages, leases, and other secured transactions.
An agreement between two companies can be created for many reasons. For instance, two companies can enter into an agreement when one company wants to provide raw materials to the other company under the terms of the contract. These contracts must be in writing and signed by both parties. If one party doesn't follow the contract, the agreement can be enforced by law for compensation.
How to Write an Agreement Between Two Parties
Describe what the agreement is for. Write down the purpose of the agreement, and start with the general description of the terms and conditions. Then you can move on to specifics.
Identify the Parties
Write down the legal names and contact information for both parties. If one or both of the parties is a company, the person signing the agreement should be identified, while also including their titles in the company.
If you're going into a partnership with another person or creating a business, you should also identify where the business will be located.
Define the role of each party. Once the role of each party is described, you can name the party by their role rather than by their name. Identifying is important in case there is a need for transferring the duties and obligations to someone else.
For example, suppose you hire someone to paint your home. You are identified as the homeowner, while the other party is the painter. You still need a small business agreement in a small business setting or in your personal life.
Definition of Terms
- List dates that the agreement goes into effect.
- Specify what each party's responsibilities are.
- Add additional expenses and conditions. If there is an expectation of a delay, these circumstances should be addressed in the contract.
- Add any considerations like intellectual property or insurance.
Breach of Contract Consequences
- Describe what a breach of contract means for each party.
- You can describe exceptions where a failure to meet expectations will be excused.
- Add remedies to be used in the case of breach of contract.
- Include which law applies and how a disagreement will be resolved.
Concluding the Agreement
- Look at the contract and make sure to understand the terms so you can resolve any confusion before signing.
- Think about getting an attorney to look over the agreement.
- Sign the contract. Some states may require a notary while you sign the contract.
- Get copies of the agreement.
- Record or file the original contract.
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