Making contracts work might be a more difficult endeavor for some than others. But that is no reason to hesitate on entering into such agreements. In fact, your business can truly benefit from such contracts, as they will help your business expand and meet financial goals and objectives.

Oral vs. Written Contracts

But when entering into contracts, it is important that all agreements be in writing, as oral agreements might lead to potential legal problems. While an oral agreement is valid in many states, it could cause potential legal issues, particularly if one of the parties breaches the oral agreement. If this occurs, the breaching party might refuse to agree that an oral agreement took place.

Written contracts will help ensure that both parties understand their roles and responsibilities, as the terms and provisions in the contract will be legally binding for both parties once signed.

What You Should Know About a Contract

There are a few things to be mindful of when entering into contracts. In order for a contract to be enforceable, there are required elements that must be met, including:

1.Offer

2.Acceptance

3.Consideration

4.Mutual assent

5.Conscionability

First and foremost, one of the parties must make an offer to the receiving party, known as the offeree. Thereafter, the offeree must accept the offer as is. Once the offer and acceptance have been made, the parties must prove consideration. This can be a simple promise to one another to perform the offer under the stated offer made, and provide a financial benefit for the offer.

Both parties must have mutual assent, meaning that they both must agree on all of the terms of the contract. Lastly, the contract must not be unconscionable, which means going against public policy as defined under the law; entered into under duress or fraud; or entered into by someone who lacks legal capacity. Someone lacks legal capacity if he is under the age of eighteen, drunk, or mentally incompetent.

Elements of a Good Contract

If all of the above-mentioned criteria are met, the contract is enforceable. However, this doesn’t necessarily mean that you have a good contract in place. You must ensure that specific language is included in the contract to prevent any potential legal issues from arising during the duration of the contract. This language includes the following:

1.Clear and concise

2.Comprehensive

3.Fair and equitable

A contract must be clear and concise, meaning that it must include plain language that is not overly complex or ambiguous in its meaning. Don’t use words that are difficult to understand.

The contract must be comprehensive; it should include all important and relevant material that either party would want to know or be aware of when entering into the contract. Any terms or provisions that are omitted could cause a legal dispute.

The terms and provisions must be fair and equitable to both parties. If the terms are fair, then the other party is likely to accept the terms. Remember that before entering into the contract, both parties will enter the negotiation stage where they will meet to discuss the goals and objectives of the contract, and what each party is looking for. Generally, the parties will discuss the contract before signing it, at which point they will identify any confusing language, overly complex language, or terms that they simply don’t agree with.

The contract must be thorough in its final copy. The last thing either party wants to have to worry about are incomplete terms, which could lead to legal issues down the line. Be sure to have your in-house counsel department review the contract to ensure consistency and thoroughness. Make sure that all exhibits are attached to the contract, and that all parties are spelled correctly and named in the contract. Ensure that all signatures are made, all initials are filled out, and the contract is notarized if required.

Clauses in a Contract

There are several clauses that can be included in any contract, including the following:

1.Payment term/schedule

2.Delivery date

The contract should specify how and when the payment will be made. If entering into a 3-month project, will the contract specify repayment in monthly installments? Will the payment be made at the beginning or end of the month? Will it be made via check or wire transfer? These are all important considerations for both parties.

If the contract involves the delivery of goods or services, when will delivery be made? If a service is to be done, when will the service be performed? How long will it take? If the contract involves the sale of goods, when will the goods be delivered? Will all of the goods be delivered at once? This is also important to include in the contract to prevent confusion among the parties.

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