Before you sign your name to the dotted line, it's imperative that you understand what your business contract says and what your business contract means. Without these two important factors, you could be putting yourself and your business on the line rather than protecting your business, your partners, or you.
You don't need to be an expert in the law or understand the minutia of complex language that often goes into a contract. In fact, the clearest and most concise contracts often ignore the confusing legalese and focus on the important aspects of the give and take in everyday language each party can understand. An experienced business contract lawyer can also be the difference between protecting your business versus unknowingly giving your assets away.
What needs to be in a business contract?
There are certain staples that all business contracts should have no matter the type of goods or services you may be working in. These fundamentals include simple but important details like:
- The date of the contract's creation
- The names of the parties involved, including entities
- Payment amounts
- Due dates of deliverables and payments
- Contract expiration date
- Potential penalties or damages in case of contract breach, missed deadlines, or incomplete services
While these are necessary details to include in your business contract, your contract will most likely not be limited simply to these features. A business contract is an important tool meant to protect your business, your company, yourself, and your partners and the overall business relationship. When everyone involved has clear motivations and defined goals, you create easy to follow instructions that can positively affect the business relationship.
Do you need a specific type of business contract?
You may need a specific kind of business contract for your specific desired outcome. You should always consider what your goals are and whether you are creating a contract for you as an individual or as a business. Your motivations will absolutely have an effect on what kind of contract you may need or want. Some of the business contracts you may need to consider include:
- Buying or selling services
- Buying or selling material items
- Selling or renting real estate or a home
- Entering into a partnership
- Entering into a joint venture
- Accepting work as a freelancer/independent contractor
- Hiring a contractor, servicers, or freelancer
You may have heard the saying, “always get it in writing.” A business contract is the legal framework for this phrase. The average organization, company, or person does not start out with the intent of making a business relationship difficult but often work from the assumption that they are correct or that their actions are correct.
It is near impossible to know if and when a person, a company, or a government entity will do something wrong in advance. A business contract not only keeps both working in good faith but also keeps both parties working on their promised outcomes.
What makes a contract fair?
A good contract should make sure that all parties involved benefit from the interaction. Many disputes in writing a contract can stem from the idea that one party is right or deserves more than another party involved in the contract. The important thing is to find fair, reasonable, and nondiscriminatory terms for everyone.
Is your contract good?
Just like ensuring your contract is fair, you should also make sure your contract is good. Not only should it benefit all parties involved but it should protect your business and yourself from possible future issues. One of the biggest pitfalls of a contract is not asking about the negative or positive possibilities, leaving them unmentioned or unclear in the contract and therefore up for argument.
A legally valid and “good” contract consists of two things:
- All parties agree and accept the terms or offers
- Items of value are exchanged
- Items of value could include services, cash, or goods
While these may make a good business contract, there are five pillars that make a legally enforceable business contract. There are state and federal regulations that most likely must be met in order to make the contract valid. Beyond the legal framework required by the local, state, or federal governments you must also keep in mind:
- Consideration – When each party provides or promises something of value. The contract is invalid if clear consideration is not present with every side involved.
- Offer and Acceptance – The offer and acceptance must be clear and leave no room for misinterpretation or misunderstanding.
- Legal Purpose – The contract agreement must not violate the law on any level.
- Capacity – Both parties must understand the agreement they are entering into and be capable of completing the services agreed upon.
- Mutual Assent – All parties involved must agree to the relationship you are entering into and the terms of the deal.
Remember, once a contract is signed, it cannot be amended, reversed, or revies without revisions. In other words, a conversation or an oral agreement will not be enough to change the terms of your business contract unless you make those changes with legal revisions or amendments to the actual contract.
Contact Weissman Law Firm
Business contracts are complex but necessary to protect your goals, your motivations, your rights, and your business. An expert Los Angeles business contract lawyer will ensure your security, safeguard what matters to you, and also help you build better business relationships.
You may not need to reinvent the wheel for your business contract but you will need to understand what will make your contract work for you. Our free Business Contract Prepare Kit: Part 1 could help guide you on the best methods for building the right contract for you. Contact us for a free consultation.