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If you run a business, you will need to engage in the drafting, negotiating, and signing business contracts routinely. Business contracts encourage compliance, confidentiality, and cooperation between two parties in a transaction. You must utilize them regularly as a business owner or manager.
Unfortunately, poorly worded or written contracts may not serve their intended purpose, which can nullify the process in the first place. Instead of leaving your business exposed to liability, consider everything you need to know about a business contract by reading the article below.
Business contracts, also known as business agreements, are legally binding written agreements between two or more business parties. They are enforceable in a civil court of law if they follow specific contract laws and other enforceability factors. There are several business contract types that businesses need and may use daily during normal operations.
Becoming familiar with them can help you understand which documents and agreements you need to have in place to run a legally and financially healthy company.
The term “business contract” is a broad term that describes any legally binding document used to govern transactions in a business context. The contracts used will vary according to state, country, industry, and transaction type. However, some contracts are used more often than others.
Examples of a few business contracts include:
The sky is the limit when it comes to the common types of business contracts we regularly use today. Markets have also supported the regular use of digital contract signing and transmittal. However, you will want to make sure the method at which you are signing contracts digitally is compliant with eSignature laws.
What makes a business contract, well, a business contract? While there are common provisions that you can find in every document, overarching principles and legal philosophies design them. Essentially, a business contract indicates that something of value was traded and that all parties agreed to the terms.
Key parts of a business contract include:
When signing a business contract, it is only as good as the language it contains. If your business contracts do not have the critical parts described above, you will experience legal issues in a court of law should you or the other parties raise a dispute. Ensure that you incorporate the essential parts as well as the standard clauses found in business contracts.
Business contracts vary in terms according to the transaction, size, payment terms, and other elements. You can organize and manage these terms by breaking your business contracts up into common clauses. This strategy will ensure that your arrangements are precise and that all principals can quickly locate the information they need.
Common clauses in business contracts include:
A well-written business contract is essential to uphold the legality and enforceability of the above-referenced provisions. Small business law and business contracts go hand-in-hand, which means you need to support both of these components. Start with a clear purpose in mind when drafting your business contracts.
Visit ContractsCounsel’s Contract Clauses resource guide.
Meet some lawyers on our platformThe purpose of business contracts is to protect the legal rights of you and your company when engaging in business relationships and transactions. If you do not have a written agreement in place, you open your organization to a host of legal issues. Consider some critical reasons as to why you should make business contracts a part of your regular practice.
Reasons to use business contracts include:
There is no question that business contracts serve vital purposes. If a legal question or dispute crops up, you will have a document that both of you signed regarding the terms and conditions of the transaction. It is harder to refute or deny proof when a judge or jury is staring at it.
If you have legal questions, visit ContractsCounsel’s Free Q&A Forum.
Lastly, avoid using oral contracts. While they are enforceable in many states, disputes generally turn into a legal fight involving your word against someone else’s. Written contracts are much easier to prove and it is always advisable to get contract terms in writing to avoid potential disputes.
Get your business contracts in writing so that they offer you the intended protections you need.
Image via Pexels by Christina Morillo
While it may be rather tempting to download a contract template online, you will serve yourself and your company well by following through on the process more professionally by hiring a lawyer. Online templates can be recycled from other transactions that may or may not be legally binding or enforceable in your geographic location without customization. Keep in mind that a contract is only as good as the language and provisions it contains. There are some reputable online template services, but most transactions require customization to make sure the contract fits your purpose.
Follow these critical steps on how to write a business contract:
As you can infer, there are several steps that you may go through to achieve the best possible result for your business contracts. You are also likely to face some tough questions as crucial issues arise. Ensure that you get help with business contracts from a legal professional directly.
Here is another article on how to write a contract.
If you need to get help with business contracts, start by speak with business contract lawyers. They can help you negotiate the terms and conditions of your deal by drafting a legal agreement that makes sense for your situation. When legal disputes arise, they can also stand by your side and mount a defense or offense against the allegations at hand.
Your business contract lawyers will also guarantee that they are compliant with your geographic region. Some states and countries require contracts to contain specific provisions for enforceability. Business contract lawyers will guide you through compliance measures as well.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.
Retired Dentist transitioned to Law, with a special interest in Commercial Real Estate, Startup businesses, Asset Purchase Agreements, and Employment Contracts. I love to help dentists and physicians with legal issues pertaining to licensing, credentialing, employment, and general business-legal questions.
Have over 40+ years of corporate and commercial law experience.
As an experienced contracts professional, I offer an affordable method to have your contracts reviewed! With my review of your contract, you can understand and reduce risks, negotiate better terms, and be your own advocate. I am an Attorney, Board Member, and Freelance Writer with a Bachelor of Arts degree, magna cum laude, in Film, Television and Theatre (“FTT”) from The University of Notre Dame. I was awarded The Catherine Hicks Award for outstanding work in FTT as voted on by the faculty. I graduated, cum laude, from Quinnipiac University School of Law, where I earned several awards for academics and for my work in the Mock Trial and Moot Court Honor Societies. Additionally, in my career, I have had much success as an in-house Corporate Attorney with a broad range of generalist experience and experience in handling a wide variety of legal matters of moderate to high exposure and complexity. My main focus in my legal career has been contract drafting, review, and negotiation. I also have a background in real estate, hospitality, sales, and sports and entertainment, among other things.
Elizabeth is an experienced attorney with a demonstrated history of handling transactional legal matters for a wide range of small businesses and entrepreneurs, with a distinct understanding of dental and medical practices. Elizabeth also earned a BBA in Accounting, giving her unique perspective about the financial considerations her clients encounter regularly while navigating the legal and business environments. Elizabeth is highly responsive, personable and has great attention to detail. She is also fluent in Spanish.
Abby is an attorney and public policy specialist who has fused together her experience as an advocate, education in economics and public health, and passion for working with animals to create healthier communities for people and animals alike. At Opening Doors PLLC, she helps housing providers ensure the integrity of animal accommodation requests, comply with fair housing requirements, and implement safer pet policies. Abby also assists residents with their pet-related housing problems and works with community stakeholders to increase housing stability in underserved communities. She is a nationally-recognized expert in animal accommodation laws and her work has been featured in The Washington Post, USA Today, Bloomberg, and Cosmopolitan magazine.
Matan is an experienced M&A, corporate, tax and real estate attorney advising closely held businesses, technology start ups, service businesses, and manufacturers in purchases, sales, and other exit strategies. Matan works with founders and first-and-second generation owners to strategically transition businesses.
We are exporters who's going to have a contract deal with an importer from Togo.
I suggest you submit a proposal and let lawyers bid on it.
Asked on Sep 23, 2023I am starting a new business venture and need to create a business contract. I am unsure of which jurisdiction the contract should be written in, as my business will have operations in multiple states. I am looking for advice on which jurisdiction would be most suitable for my business contract.
I most instances, I would specify in the contract that the laws of the State of your principal office and business operations apply to the contract. I would also include a mandatory local jurisdiction and local venue for the same reasons. Choice of Law, Jurisdiction, and Venue are each separate concepts.
Asked on Sep 24, 2023I am currently in the process of starting a business and I have been presented with a contract that includes a termination fee. I am not sure what obligations I have with respect to this fee and I would like to know what kind of legal implications I may be subject to in the event of a termination. I am also interested in exploring the potential for negotiation of this fee in order to ensure that I am not overpaying for services that I may no longer need.
A termination fee is a payment that one party to a contract pays the other party for terminating the contract before it expires. The general purpose is to compensate the non-terminating party for resources used and/or opportunities missed as a result of entering into the contract that is then terminated early. A well-written termination fee clause will typically include the exact fee to be paid or, if not exact, a clear explanation of how the fee is to be calculated. Additionally, it will include a timeline for the payment(s). Unless the terms of the contract are otherwise contrary to law, the terminating party is presumed to be responsible for paying the stated sum at the stated time. While it is common for a business contract to contain a termination fee clause, a termination fee that is unreasonable under the circumstances is at risk of not being enforceable. However, disputing a termination fee clause can require a lot of the parties' time and money. Before signing a contract with a termination fee clause, all of the parties should be sure that they understand and agree with the clause. If you are considering signing a contract with a termination fee clause, you might have an attorney review it before you sign it. The attorney might even be able to assist you with negotiating changes, if needed or helpful.
Asked on Oct 4, 2022I want to get out of a contract with our main vendor and have been reading the contract but it doesn't say much. I believe this is in the termination clause based on research, but it doesn't specifically say what I need to do. Any advice?
A contract generally has termination terms; that would be the way to get out. If there are no terms, then the best thing to do is negotiate with the party on an exit strategy that is agreeable to both parties. As a contracts attorney that specializes in contracts and contracts disputes, I would be happy to assist. You can connect with me on the website or through my profile page - Donya Gordon Donya
Asked on Mar 28, 2022I am an active day trader (and may invest in real estate this year) so, would setting up an "investment LLC" be a benefit for me and help me lower my tax obligation when taking monthly profits as part of my "salary"? Should I include my wife as an employee and pay her as an expense? And, my sons, to a lesser degree? Would Capital gains be calculated differently if I just invested as an individual? Is an LLC the best corporate type of filing? Thank you, Peter F.
I suggest you consult with an attorney and speak to your accountant as to how to best structure the set up.
