Have you ever wondered what makes a business contract tick? How do organizations determine what to put in them—and what should stay out? Unless you are exposed to this area of business, you may not be able to recognize the in’s and outs of a binding contract. While the word ‘contract’ may seem daunting, a true agreement has a few key recognizable points that are easy to remember. This article will show you the basics of contracts—which can also be referred to as An Exchange of Promises. By learning the basics of contractual agreements, you will be able to effectively understand and recognize what goes on constantly every day in every industry.
While not the most interesting class I ever took, as a future business attorney, Contracts 101 provided me with a foundation for understanding most legal and business concepts in law school and the real world. At the core of this foundation is the concept that contracts are a vital component of any business transaction and that contracts don’t exist just to make attorneys happy. Whether a service provider or the client, a well thought out contract can protect valuable interests.
Did you know that oral contracts are just as enforceable as written ones? While this is true, attorneys will normally recommend putting a contract in writing so that the terms are clearly understood and provable. A piece of paper or a computer file, signed and dated, cannot easily be denied. The written agreement will be used as a reference on what the parties have agreed and can determine who is really at fault in the case of a discrepancy.
Reveal relies heavily on written contracts to assure that processes and relationships are clearly understood, whether in buying materials or contracting a consultant. A contract arises when two or more persons agree to legal obligations by an exchange of “consideration,” or things of value. Consideration might be categorized as performing tasks or providing personal property to the other party.
For an exchange of promises to be enforceable, there must be a “meeting of the minds” between the parties and an intent to enter into a contractual relationship. The contents of each contract depend upon its purpose, generally the names of the parties, each party’s commitments, the time frame, and the services or goods exchanged should be stated. While long sentences and ancient word forms may impress, it is best to use plain English when crafting these contracts.
Apply this concept– when was the last time you signed a receipt at a store or restaurant? It may seem mundane, but your signature on a receipt is the simplest form of a binding contract. Upon signing, you have agreed to pay the service provider for the goods you have purchased, consumed, or used. As previously stated above, go through this checklist to see if this contract follows the rules:
Written contracts can also provide non-disclosure provisions protecting sensitive information. The concerned parties can be legally bound to hold in secrecy the transactions involved, and a breach of this confidentiality agreement would allow the party to be held liable under the agreement.
There is an extensive body of law regarding what state law or federal law might control a particular legal claim. To save the time and money required in hiring an attorney, a written contract can require a specific jurisdiction for a lawsuit, provided the named jurisdiction has some relationship to one of the parties.
A written contract plays a vital role in business transactions for Reveal and provides the ultimate understanding of the agreement about services rendered to a client, as well as obligations to employees and contractors. In addition to making the agreement between concerned parties legally binding, a contract also serves as a valuable future reference in avoiding misunderstandings or disputes.
Should you find yourself questioning any contract’s legitimacy, run through this checklist in your mind. Knowledge is power, and by applying the knowledge in this article to your daily life, you should be able to recognize the key variables for what takes place when writing a legitimate business exchange of promises.
Tags: Contracts, Reveal