It’s frustrating when someone makes a promise but fails to fulfill it. This is one of the reasons why a contract is prepared to legally bind the contracting parties for the successful execution of an activity. It also helps safeguard the resources of a company in the event of a dispute.
Contracts are crucial documents that state the expectations of the parties involved as well as the details on how certain situations may be resolved. Given its significance from a legal standpoint, the contract must be written clearly and accurately for it to serve its purpose.
To create a contract that is legal and enforceable, take note of the following elements:
1. Offer: A contract should always come with an offer. This acts as a proposal from one party to another, discussing the terms and arrangements that will take place once an agreement is made. If the offer is to purchase a car, the price, specifications, and warranty details of the transaction must be included. The other party is also given the privilege to accept, reject, or amend this offer.
2. Acceptance: This can be done in writing, in person, or over phone. What’s important is that the acceptance is communicated to the offering party through an obvious declaration.
3. Consideration: This pertains to something that is of value to either parties in the contract agreement. It doesn’t always have to involve money, as a property, service, action, or promise can already possess sufficient value to each party. This usually covers an exchange that both parties may benefit from as well.
4. Competence or Capacity: This refers to a party’s ability to take part in a contract. For one, a party must be at least 18 years of age to legally enter into a contract. Mental illness is another reason for incapacity, as someone with a certain disease or disability may not fully understand the terms and conditions of a contract. During such instances, the said party has the right to revoke his acceptance of an offer.
5. Mutual Consent: If both parties have the legal capacity to freely consent to a contract, then the terms and arrangements stated in the document may be executed.
6. Legality: Keep in mind that a contract is only valid if the activity it covers is legal. A contract that requires a certain party to commit a criminal act is not enforceable by law. So if the activity specified in the document is considered illegal in the area you are in, the contract serves no purpose. You may also see business contract examples.
7. Writing: While not all contracts need to be in writing, written contracts are required in certain circumstances in order for it to be enforceable, particularly those that involve a financial transaction.
Though its tempting to use a letter or a handshake agreement to seal the deal, verbal agreements aren’t something to rely on when it comes to addressing significant business operations. So to help you write an enforceable contract, follow the guidelines given below:
1. Name the parties: Some people make the mistake of writing the name of a representative of the entity instead of the actual entity. Unless you’re running a business as a sole proprietorship, it’s best to enter the name of your business entity to make the organization liable as a whole.
2. Define the scope: Identify the scope of the project you are to provide along with a proposed timeline for its completion. It’s important to be as specific and detailed as possible to give readers an idea of what is set to occur. If possible, provide a tentative time schedule for each phase of the project as well. Time and amounts of payments must also be indicated in the document.You may also see contract examples
3. Determine the length of the contract period: Contracts usually last for a specific span of time, such as six months to a year. Once the contract ends, each party can opt to sign again under the same terms or have the contract altered for a valid reason. Knowing the length of your contract will provide you enough time to proposed changes in areas that aren’t working well, or to decide whether to end the working relationship without breaking the ongoing agreement.
4. Specify how disputes will be handled: Disagreements are natural in a relationship. But if both parties fail to resolve these issues together, things can get pretty messy. Thus, it’s important to note down how you plan to handle disputes when they happen.
5. Sign and date the contract: Finalize the document by having both parties sign and date the contract. This will prove that each party has understood and agreed to the terms stated in the document.
The right contract can allow parties to embark in various business ventures with clients or collaborators who can contribute to the growth and development of the organization. So to make crafting these documents a lot easier, here are a few things to remember:
When forming an agreement with another party, it’s important to know what type of contract will best suit your purpose. That being said, let’s take a closer look into each type:
By definition, a contract is a voluntary and legally binding agreement made between two or more parties. This can cover anything from an employment to a sale or lease. It is used to enforce an agreement in which the concerned parties’ responsibilities are defined and understood. The terms and conditions of the agreement must be also be stated in a clear and detailed manner. This will ensure that those involved are comfortable with respect to the relationship.
A simple contract can be written without the presence of an attorney. It can be a written or oral agreement, just as long as the two parties can agree between themselves and settle on the contract’s terms. However, lawful and enforceable are two different things that must be understood. Though a verbal contract isn’t illegal, it can only be enforceable if it is in writing. Given how complex the rules of law can be, consulting your lawyer is still a recommended approach.
It’s not unusual for a small business to write out a few contracts by hand, but the verdict as to whether these handwritten contracts are legitimate or not would depend on various circumstances. Despite this, as long as the documents spells out specific details about the terms of contract and both parties have signed to seal this agreement, then the contract may be considered as legally binding and enforceable in court. If you’re concerned about the situation you are in, it’s always best to contact your business litigation lawyer for professional advice.
So there you have it! Solidify your next business agreement by making a formal contract with the help of the professionally made templates provided in this article.