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2012-05-17 00:00:00GeneralEnglish About Contracts – Basics

All About Contracts – Basics

2 min read

A business contract is an important key in ensuring success and continuity for your business venture. Contracts often represent a tool that companies use to safeguard their resources. Contrary to popular belief, a contract is equally important to small businesses as it is to a larger and more established one.

A business contract is often used when:

• Hiring employees

• Purchasing or providing goods or services

• Purchasing/selling land

• Taking a loan

• Leasing or renting office space/ warehouse

• Entering into partnerships or joint ventures

• Entering into confidentiality agreements

What do Contracts include?

The following are some of the terms a business contract should include which outline a fair view for any issues between the contracting parties:

• Names of the contracting parties

• Contract dates (start and end dates in case of lease/service contracts)

• Renewal terms if any

• Payment terms and details – payment date and amount

• In case of sale/purchase of good/services, specific products or services to be delivered, delivery time

• Person responsible for any problems, disputes and status reports

• Disclaimers to protect your company from errors or omissions

• Cancellation and notice terms – in case the goods or services are not delivered.

Tips for making a solid Business Contract:

A well-drafted contract is vital for a business as it spells out the rights and obligations of each party and protects you and your business in case of a litigation.

1. Simple and Clear. Keep it simple, clear and focused laying out all the terms, conditions, expectations and responsibilities very specifically and in detail in order to avoid misunderstandings and delays. In case you are not drafting the contract, outline the conditions for your business before you begin negotiating.

2. Know the Legal Requirements. Certain types of contract require the knowledge of state and local regulations. For example, Establishment Act or law regarding leasing a property may be different in different states. Research online, check with your local chamber of commerce, or consult your mentor or attorney.

3. Terms of Dispute. If you and the other party are located in different states, you should choose only one of your state’s laws to apply to the contract to avoid complicated legal disputes later. In addition, set out the circumstances under which the parties can terminate the contract. Also specify where you will mediate, arbitrate, or bring legal actions under the contract.

4. Consult an Attorney. Business owners entering into binding agreements should be aware of all the legal risks and implications. Take help of a good attorney to make your contract into an airtight one which saves you headaches and exorbitant legal fees.   Also, it is important to record and securely store agreements/contracts with customers, suppliers and employees. These documents may come in handy in the event of a dispute.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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